Question

12. (25 Points) A company purchased and installed a machine on January 1, 2015, at a total cost of $72,000. Straight-line deprecia tion was calculated based on the assumption of a five-year life and no salvage value. The machine was disposed of on July 31, 2018 depreciation has been done for all periods prior to January 1, 2015). b. Prepare the general journal entry to record the disposal of the machine under each of these three independent situations: (1) The machine was sold for $22,000 cash. (2) The machine was sold for $15,000 cash. (3) The machine was totally destroyed in a fire and the insurance company settled the claim for $18,000 cash. Answer: a. July 31 July 31 b.(2) July 31 b.(3) July 31

Answer 1

1)Depreciation Per Year =72,000/5 =14,400

On 31st December 2015

Dr Depreciation expense 14,400
Cr Accumulated depreciation 14,400  

On 31st December 2016

Dr Depreciation expense 14,400
Cr Accumulated depreciation 14,400  

On 31st December 2017

Dr Depreciation expense 14,400
Cr Accumulated depreciation 14,400

On 31st July 2018

Dr Depreciation expense 8,400
Cr Accumulated depreciation 8,400

b)

i) Dr Cash 22,000
Dr Accumulated depreciation 51,600
Cr Machine 72,000
Cr Gain on sale of machine 1,600

ii)

Dr Cash 15,000
Dr Accumulated depreciation 51,600 Dr Gain on sale of machine 5,400
Cr Machine 72,000

iii)

Dr Cash 18,000
Dr Accumulated depreciation 51,600 Dr Compensation loss on machine destroyed in fire 2,400
Cr Machine 72,000