Question

On December 31, 2020, Culver Inc. has a machine with a book value of $958,800. The...

On December 31, 2020, Culver Inc. has a machine with a book value of $958,800. The original cost and related accumulated depreciation at this date are as follows. Machine $1,326,000 Less: Accumulated depreciation 367,200 Book value $958,800 Depreciation is computed at $61,200 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 $438,600 was received for this casualty. Assume the settlement was received immediately

B)On April 1, 2021, Culver sold the machine for $1,060,800 to Yoakam Company

C)On July 31, 2021, 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 $1,122,000

Homework Answers

Answer #1

a) Journal entry

Date General Journal Debit Credit
Aug 31 Depreciation expense (61200/12*8) 40800
Accumulated depreciation-machine 40800
Aug 31 Cash 438600
Accumulated depreciation-machine (367200+40800) 408000
Loss on disposal of machine 479400
Machine 1326000

b) Journal entry

Date General Journal Debit Credit
Apr 1 Depreciation expense (61200/12*3) 15300
Accumulated depreciation-machine 15300
Apr 1 Cash 1060800
Accumulated depreciation-machine (367200+15300) 382500
Gain on disposal of machine 117300
Machine 1326000

c) Journal entry

Date General Journal Debit Credit
Jul 31 Depreciation expense (61200/12*7) 35700
Accumulated depreciation-machine 35700
Accumulated depreciation-machine (367200+35700) 402900
Loss on disposal of machine 923100
Machine 1326000
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