Question

On December 31, 2017, Sage Inc. has a machine with a book value of $1,071,600. The original cost and related accumulated depreciation at this date are as follows.

Machine $1,482,000

Less: Accumulated depreciation 410,400

Book value $1,071,600

Depreciation is computed at $68,400 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 $490,200 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.)

On April 1, 2018, Sage sold the machine for $1,185,600 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.)

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 $1,254,000. (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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1. Fire destroys
Date	Account	Debit	Credit
August 31, 2018	Depreciation Expense	45600
	Accumulated Depreciation		45600
	(Depreciation for 8 months 68400/12*8)
August 31, 2018	Cash	490200
	Lass from Fire (1482000-490200-456000)	535800
	Acumulated Depreciation (410400+45600)	456000
	Machine		1482000
2. Sale of Machine
Date	Account	Debit	Credit
April 1, 2018	Depreciation Expense	17100
	Accumulated Depreciation		17100
	(Depreciation for 3 months 68400/12*3)
April 31, 2018	Cash	1185600
	Acumulated Depreciation (410400+17010)	427500
	Gain on sale of machine		131100
	Machine		1482000
3. Donation
Date	Account	Debit	Credit
July 31, 2018	Depreciation Expense	39900
	Accumulated Depreciation		39900
	(Depreciation for 7 months 68400/12*7)
July 31, 2018 Acumulated Depreciation (410400+39900) 450300 Donation Expense (1482000-450300) 1031700 Machine 1482000