E10.24 (L0 5) (Entries for Disposition of Assets) On December 31, 2020, Autohome Inc. has a...
E10.24 (L0 5) (Entries for Disposition of Assets) On December 31, 2020, Autohome Inc. has a machine with a book value of $260,000. The original cost and related accumulated depreciation at this date are as follows:
Machine $980,000
Accumulated depreciation 720,000
Book value $260,000
Depreciation is computed at $72,000 per year on a straight-line basis.
Instructions
Presented below is a set of independent situations. For each independent situation, indicate the journal entry to be made to record the transaction. Make sure that depreciation entries are made to update the book value of the machine prior to its disposal.
- A hurricane completely destroys the machine on October 31, 2021. An insurance settlement of $460,000 was received for this casualty. Assume the settlement was received immediately.
- On June 1, 2021, Autohome sold the machine for $300,000.
- On August 31, 2021, the company donated this machine to the Royal Palm Beach City Council. The fair value of the machine at the time of the donation was estimated to be $610,000.
Homework Answers
a) Journal entry
| Date | account and explanation | Debit | Credit |
| Oct 31 | Depreciation expense (72000*10/12) | 60000 | |
| Accumulated depreciation-Machine | 60000 | ||
| Oct 31 | Cash | 460000 | |
| Accumulated depreciation-Machine | 780000 | ||
| Gain on disposal of machine | 260000 | ||
| Machine | 980000 | ||
b) Journal entry
| Date | account and explanation | Debit | Credit |
| June 1 | Depreciation expense (72000*5/12) | 30000 | |
| Accumulated depreciation-Machine | 30000 | ||
| June 1 | Cash | 300000 | |
| Accumulated depreciation-Machine | 750000 | ||
| Gain on disposal of machine | 70000 | ||
| Machine | 980000 | ||
c) Journal entry
| Date | account and explanation | Debit | Credit |
| Aug 31 | Depreciation expense (72000*8/12) | 48000 | |
| Accumulated depreciation-Machine | 48000 | ||
| Aug 31 | Cash | 610000 | |
| Accumulated depreciation-Machine | 768000 | ||
| Gain on disposal of machine | 398000 | ||
| Machine | 980000 | ||
Add Answer to:
E10.24 (L0 5)
(Entries for Disposition of Assets) On December 31, 2020,
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