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.

Answer 1

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