Question

On December 31, 2017, Swifty Inc. has a machine with a book value of $1,109,200. The original cost and related accumulated depreciation at this date are as follows. Machine $1,534,000 Less: Accumulated depreciation 424,800 Book value $1,109,200 Depreciation is computed at $70,800 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, 2018. An insurance settlement of $507,400 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, 2018 (To record current depreciation.) August 31, 2018 (To record loss of the machine.) SHOW LIST OF ACCOUNTS On April 1, 2018, Swifty sold the machine for $1,227,200 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.) Date Account Titles and Explanation Debit Credit April 1, 2018 (To record current depreciation.) April 1, 2018 (To record sale of the machine.) SHOW LIST OF ACCOUNTS 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 $1,298,000. (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, 2018 (To record current depreciation.) July 31, 2018 (To record donation of the machine.)

Answer 1

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Situation 1:
	Book Value as on 31st December 2017		$1,109,200
	Less: Depreciaton for 8 Months	70800/12*8	$     47,200
	Book Value as on 31st August 2018		$1,062,000
	Insurance settlement		$   507,400
	Loss		$ -554,600
Journal Entry:
	Depreciation Expense	$       47,200
	Accumulated Depreciation		$     47,200
	Cash	$     507,400
	Accumulated Depreciation	$     472,000		424800+47200
	Loss due to Fire	$     554,600
	Machine		$1,534,000
Situation 2:
	Book Value as on 31st December 2017		$1,109,200
	Less: Depreciaton for 3 Months	70800/12*3	$     17,700
	Book Value as on April 1 2018		$1,091,500
	Sale Value		$1,227,200
	Gain on Sale		$   135,700
Journal Entry:
	Depreciation Expense	$       17,700
	Accumulated Depreciation		$     17,700
	Cash	$ 1,227,200
	Accumulated Depreciation	$     442,500		424800+17700
	Gain on Sale of Machine		$   135,700
	Machine		$1,534,000
Situation 3:
	Book Value as on 31st December 2017		$1,109,200
	Less: Depreciaton for 7 Months	70800/12*7	$     41,300
	Book Value as on July 31 2018		$1,067,900
Journal Entry:
	Depreciation Expense	$       41,300
	Accumulated Depreciation		$     41,300
	Accumulated Depreciation	$     466,100		424800+41300
	Loss on Donated Machine		$1,067,900
	Machine		$1,534,000