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Rayya Co. purchases and installs a machine on January 1, 2018, at a total cost of...

Rayya Co. purchases and installs a machine on January 1, 2018, at a total cost of $92,400. 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, 2022, during its fifth year of service.

  

Prepare entries to record the partial year’s depreciation on July 1, 2022, and to record the disposal under the following separate assumptions:

(1) The machine is sold for $46,200 cash.

(2) An insurance settlement of $38,808 is received due to the machine’s total destruction in a fire.

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Answer #1

Journal entry Depreciation

Date General Journal Debit Credit
July 1 Depreciation expense (92400/8)*6/12 5775
Accumulated Depreciation-Machine 5775

Journal entry

Date General Journal Debit Credit
July 1 Cash 46200
Accumulated depreciation-Machine (92400/8)*4.5 51975
Gain on sale of machine 5775
Machine 92400

Journal entry

Date General Journal Debit Credit
July 1 Cash 38808
Accumulated depreciation-Machine (92400/8)*4.5 51975
Loss on sale of machine 1617
Machine 92400
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