Question

On December 31, 2017, Cullumber Inc. has a machine with a book value of $ 1,222,000. The original cost and related accumulated depreciation at this date are as follows.

Machine		$ 1,690,000
Less: Accumulated depreciation		468,000
Book value		$ 1,222,000

Depreciation is computed at $ 78,000 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 $ 559,000 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

enter an account title to record current depreciation on August 31, 2018

enter a debit amount

enter a credit amount

enter an account title to record current depreciation on August 31, 2018

enter a debit amount

enter a credit amount

(To record current depreciation.)

August 31, 2018

enter an account title to record loss of the machine on August 31, 2018

enter a debit amount

enter a credit amount

enter an account title to record loss of the machine on August 31, 2018

enter a debit amount

enter a credit amount

enter an account title to record loss of the machine on August 31, 2018

enter a debit amount

enter a credit amount

enter an account title to record loss of the machine on August 31, 2018

enter a debit amount

enter a credit amount

(To record loss of the machine.)

On April 1, 2018, Cullumber sold the machine for $ 1,352,000 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

enter an account title to record current depreciation on April 1, 2018

enter a debit amount

enter a credit amount

enter an account title to record current depreciation on April 1, 2018

enter a debit amount

enter a credit amount

(To record current depreciation.)

April 1, 2018

enter an account title to record sale of the machine on April 1, 2018

enter a debit amount

enter a credit amount

enter an account title to record sale of the machine on April 1, 2018

enter a debit amount

enter a credit amount

enter an account title to record sale of the machine on April 1, 2018

enter a debit amount

enter a credit amount

enter an account title to record sale of the machine on April 1, 2018

enter a debit amount

enter a credit amount

(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 $ 1,430,000. (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	enter an account title to record current depreciation on July 31, 2018	enter a debit amount	enter a credit amount
	enter an account title to record current depreciation on July 31, 2018	enter a debit amount	enter a credit amount
	(To record current depreciation.)
July 31, 2018	enter an account title to record donation of the machine on July 31, 2018	enter a debit amount	enter a credit amount
	enter an account title to record donation of the machine on July 31, 2018	enter a debit amount	enter a credit amount
	enter an account title to record donation of the machine on July 31, 2018	enter a debit amount	enter a credit amount
	enter an account title to record donation of the machine on July 31, 2018	enter a debit amount	enter a credit amount
	(To record donation of the machine.)

Answer 1

JOURNAL   

date	Particulars	Debit	Credit
31.Aug	Depreciation(78000*8/12=52000)	52000
	Accumulated Depreciation		52000
31.Aug	Bank	559000
	Accumulated Depreciation(468000+52000)	520000
	Profit and Loss	611000
	Machine		1690000
30 April	Depreciation	19500
	Accumulated Depreciation(78000*3/12)		19500
30 April	Bank	1352000
	Accumulated Depreciation(468000+19500)	487500
	Profit and Loss		149500
	Machine		1690000
31 july	Depreciation(78000*7/12=45500)	45500
	Accumulated Depreciation		45500
31. july	Donation	1430000
	Accumulated Depreciation(468000+45500)	513500
	Profit & loss		253500
	Machine		1690000