Question

On December 31, 2017, Monty Inc. has a machine with a book value of $996,400. The original cost and related accumulated depreciation at this date are as follows.

Machine		$1,378,000
Less: Accumulated depreciation		381,600
Book value		$996,400

Depreciation is computed at $63,600 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.

1- A fire completely destroys the machine on August 31, 2018. An insurance settlement of $455,800 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.)

2- On April 1, 2018, Monty sold the machine for $1,102,400 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.)

3- 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 $1,166,000. (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.)

Answer 1

	Date	Account titles & Explanations					Debit	Credit
1)	8/31/2018	Depreciation expense					42400
		Accumulated depreciation						42,400
		(63600/12)*8
		Cash					455,800
		Accumulated depreciation					424000
		Loss on disposal					498,200
		Machine						1,378,000
2)	4/1/2018	Depreciation expense					15900
		Accumulated depreciation						15,900
		(63600/12)*3
		Cash					1,102,400
		Accumulated depreciation					397500
		Machine						1,378,000
		Gain on disposal						121,900
3)	7/31/2018	Depreciation expense					37100
		Accumulated depreciation						37,100
		(63600/12)*7
		Contribution expense					1,166,000
		Accumulated depreciation					418700
		Machine						1,378,000
		Gain on disposal						206,700