Question

In: Accounting

Rayya Co. purchases and installs a machine on January 1, 2016, at a total cost of...

Rayya Co. purchases and installs a machine on January 1, 2016, at a total cost of $142,800. 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, 2020, during its fifth year of service.

Prepare entries to record the partial year’s depreciation on July 1, 2020.

Record the depreciation expense as of July 1, 2020.

Prepare entries to record the disposal under the following separate assumptions:

1. The machine is sold for $71,400 cash.|

Record the sale of machinery for $71,400 cash.

2. An insurance settlement of $59,976 is received due to the machine’s total destruction in a fire.

Record the insurance settlement received of $59,976 resulting from the total destruction of the machine in a fire.

Solutions

Expert Solution

Record the depreciation expense as of July 1, 2020.

Date accounts & explanation debit Credit
2020, july 1 Depreciation expense (142800/8)*6/12 8925
    Accumlated depreciation 8925
(To record depreciation)

Record the sale of machinery for $71,400 cash.

Date accounts & explanation debit Credit
2020,july 1 Cash 71400
Accumlated depreciation (142800/8)*4.5 80325
     Machine 142800
     Gain on sale of machine 8925
(To record sale of machine)

Record the insurance settlement received of $59,976 resulting from the total destruction of the machine in a fire.

Date accounts & explanation debit Credit
2020,july 1 Cash 59976
Accumlated depreciation (142800/8)*4.5 80325
Loss on destruction of machin 2499
     Machine 142800
(To record destruction of machine)

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