E10-24 On December 31, 2014, Travis Tritt Inc. has a
machine with a book value of $940,000. The original cost and related
accumulated depreciation at this date are as follows.
Machine $1,300,000
Less: Accumulated depreciation 360,000
Book value $940,000
Depreciation is computed at $60,000 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, 2015. An insurance
settlement of $430,000 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, 2015
(To
record current depreciation.)
August
31, 2015
(To
record loss of the machine.)
On April 1, 2015, Tritt sold the machine for $1,040,000 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,
2015
(To
record current depreciation.)
April 1,
2015
(To
record sale of the machine.)
On July 31, 2015, 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 $1,100,000. (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,
2015
(To
record current depreciation.)
July 31,
2015
(To
record donation of the machine.)
SOLUTION PREVIEW
(a)
|
Depreciation Expense (8/12 X $60,000)
|
40,000
|
|
|
Accumulated
Depreciation—Machinery
|
|
40,000
|
|
|
|
|
|
Loss on Disposal of Machinery ($1,300,000 – $400,000) – $430,000
|
470,000
|
|
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