On December 31, 2017, Sage Inc. has a machine with a book value of $1,071,600. T
ID: 2512984 • Letter: O
Question
On December 31, 2017, Sage Inc. has a machine with a book value of $1,071,600. The original cost and related accumulated depreciation at this date are as follows.
Machine $1,482,000
Less: Accumulated depreciation 410,400
Book value $1,071,600
Depreciation is computed at $68,400 per year on a straight-line basis.
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 fire completely destroys the machine on August 31, 2018. An insurance settlement of $490,200 was received for this casualty. Assume the settlement was received immediately. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date Account Titles and Explanation Debit Credit
August 31, 2018 (To record current depreciation.)
August 31, 2018 (To record loss of the machine.)
On April 1, 2018, Sage sold the machine for $1,185,600 to Dwight Yoakam Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit April 1, 2018 (To record current depreciation.) April 1, 2018 (To record sale of the machine.)
On July 31, 2018, the company donated this machine to the Mountain King City Council. The fair value of the machine at the time of the donation was estimated to be $1,254,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit July 31, 2018 (To record current depreciation.) July 31, 2018 (To record donation of the machine.)
Explanation / Answer
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1. Fire destroys Date Account Debit Credit August 31, 2018 Depreciation Expense 45600 Accumulated Depreciation 45600 (Depreciation for 8 months 68400/12*8) August 31, 2018 Cash 490200 Lass from Fire (1482000-490200-456000) 535800 Acumulated Depreciation (410400+45600) 456000 Machine 1482000 2. Sale of Machine Date Account Debit Credit April 1, 2018 Depreciation Expense 17100 Accumulated Depreciation 17100 (Depreciation for 3 months 68400/12*3) April 31, 2018 Cash 1185600 Acumulated Depreciation (410400+17010) 427500 Gain on sale of machine 131100 Machine 1482000 3. Donation Date Account Debit Credit July 31, 2018 Depreciation Expense 39900 Accumulated Depreciation 39900 (Depreciation for 7 months 68400/12*7) July 31, 2018 Acumulated Depreciation (410400+39900) 450300 Loss on Machine (1254000-450300) 803700 Machine 1254000Related Questions
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