Rayya Co. purchases and installs a machine on January 1, 2017, at a total cost o

Question

Rayya Co. purchases and installs a machine on January 1, 2017, at a total cost of $142,800. Straight-line depreciation is taken each year for four years assuming a eight-year life and no salvage value. The machine is disposed of on July 1, 2021, during its fifth year of service.
  
Prepare entries to record the partial year’s depreciation on July 1, 2021, and to record the disposal under the following separate assumptions: (1) The machine is sold for $71,400 cash. (2) An insurance settlement of $59,976 is received due to the machine’s total destruction in a fire.

Journal entry worksheet Record the depreciation expense as of July 1, 2021 Note: Enter debits before credits. Date General Journal Debit Credit July 01, 2021 Record entry Clear entry View general journal

Explanation / Answer

1-Jul-21 Depreciation expense 8925 =142800/8/12*6         Accumulated depreciation—Machinery 8925 1-Jul-21 Cash 71400 Accumulated depreciation—Machinery 80325 =(142800/8*4)+8925         Gain on sale of machinery 8925         Machinery 142800 1-Jul-21 Cash 59976 Loss from fire 2499 Accumulated depreciation—Machinery 80325         Machinery 142800

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