Question

On December 31, 2020, Carla Inc. has a machine with a book value of $1,334,800. The original cost and related accumulated depreciation at this date are as follows.

Machine		$1,846,000
Less: Accumulated depreciation		511,200
Book value		$1,334,800

Depreciation is computed at $85,200 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 fire completely destroys the machine on August 31, 2021. An insurance settlement of $610,600 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.)

  

On April 1, 2021, Carla sold the machine for $1,476,800 to 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, 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.)
April 1, 2021	enter an account title to record sale of the machine	enter a debit amount	enter a credit amount
	enter an account title to record sale of the machine	enter a debit amount	enter a credit amount
	enter an account title to record sale of the machine	enter a debit amount	enter a credit amount
	enter an account title to record sale of the machine	enter a debit amount	enter a credit amount
	(To record sale of the machine.)

  

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 $1,562,000. (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, 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.)
July 31, 2021	enter an account title to record donation of the machine	enter a debit amount	enter a credit amount
	enter an account title to record donation of the machine	enter a debit amount	enter a credit amount
	enter an account title to record donation of the machine	enter a debit amount	enter a credit amount
	enter an account title to record donation of the machine	enter a debit amount	enter a credit amount
	(To record donation of the machine.)

Answer 1

Date	Particulars	Debit	Credit	Remarks
Case 1
Aug 31, 2021	Depreciation	56,800		Dep for 8 months till Aug 31         85200*8/12
	To Accumulated Depreciation		56,800
	(To record depreciation till Aug 31, 2021)
Aug 31, 2021	Cash/ Bank A/c	6,10,600		Insurance claim of 610,600
	Accumulated Depreciation	5,68,000		=511200+56800
	Loss due to fire (Bal. Fig.)	6,67,400
	To Machine		18,46,000
	(To record insurance settlement of machinery )
Case 2
Apr 1, 2021	Depreciation	21,300		Dep for 3 months till March 31         85200*3/12
	To Accumulated Depreciation		21,300
	(To record depreciation till March 31, 2021)
Apr 1, 2021	Yoakam Company	14,76,800
	Accumulated Depreciation	5,32,500		=511200+21300
	To Machine		18,46,000
	To Profit on sales of machine (Bal. Figure)		1,63,300
	(To record sale of machinery to Yoakam Company)
Case 3
July 31, 2021	Depreciation	49,700		Dep for 7 months till March 31         85200*7/12
	To Accumulated Depreciation		49,700
	(To record depreciation till July 31, 2021)
July 31, 2021	Donation Expenses Account	15,62,000		At Fair Value
	Accumulated Depreciation	5,60,900		=511200+49700
	To Machine		18,46,000
	To Gain on machine donation (Bal. Figure)		2,76,900
	(To record donation of machinery to Mountain King City Council)