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 $117,600. 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 $58,800 cash. (2) An insurance settlement of $49,392 is received due to the machine’s total destruction in a fire.

Explanation / Answer

1-Jul Depreciation expense 7350 =117600/8/12*6         Accumulated depreciation—Machinery 7350 1 1-Jul Cash 58800 Accumulated depreciation—Machinery 66150 =(117600/8*4)+7350           Gain on sale of machinery 7350           Machinery 117600 2 1-Jul Cash 49392 Accumulated depreciation—Machinery 66150 Loss from fire 2058           Machinery 117600

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