Question

On December 31, 2020, Sweet Inc. has a machine with a book value of $1,203,200. The original cost and related accumulated depreciation at this date are as follows.

Machine		$1,664,000
Less: Accumulated depreciation		460,800
Book value		$1,203,200

Depreciation is computed at $76,800 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)

A fire completely destroys the machine on August 31, 2021. An insurance settlement of $550,400 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, 2021	enter an account title to record current depreciation	enter a debit amount	enter a credit amount
	enter an account title to record current depreciation	enter a debit amount	enter a credit amount
	(To record current depreciation.)
August 31, 2021	enter an account title to record loss of the machine	enter a debit amount	enter a credit amount
	enter an account title to record loss of the machine	enter a debit amount	enter a credit amount
	enter an account title to record loss of the machine	enter a debit amount	enter a credit amount
	enter an account title to record loss of the machine	enter a debit amount	enter a credit amount
	(To record loss of the machine.)

Answer 1

(a)

A fire completely destroys the machine on August 31, 2021. An insurance settlement of $550,400 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, 2021	Depreciation expense (76800*8/12)	51200
	Accumulated depreciation-Machine		51200
	(To record current depreciation.)
August 31, 2021	Cash	550400
	Accumulated depreciation-Machine (460800+51200)	512000
	Loss on disposal of machine	601600
	Machine		1664000
	(To record loss of the machine.)