EA company purchased and installed a machine on January 1, 2006 at a total cost

Question

EA company purchased and installed a machine on January 1, 2006 at a total cost of $72,000. Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value. The machine was disposed of on December 31, 2009. . Prepare a depreciation schedule for this piece of equipment. DuK 2. Prepare the general journal entry to record the disposal of the machine on December 31, 2009 for each of the following scenarios: . The machine was sold for $22,000 cash . The machine was sold for $15,000 cash The machine was totally destroyed in a fire and the insurance company settled the claim for 18,000 cash

Explanation / Answer

1) DEPRECIATION SCHEDULE: Annual depreciation = 72000/5 = $14400. Year Beginning Book Value Depreciation Expense Accumulated Depreciation Ending BookValue 2006 72000 14400 14400 57600 2007 57600 14400 28800 43200 2008 43200 14400 43200 28800 2009 28800 14400 57600 14400 2) JOURNAL ENTRIES: a) Machine sold for $22000: Debit Credit Cash 22000 Accumulated depreciation-Machinery 57600 Gain on sale of Machinery 7600 Machinery 72000 b) Machine sold for $15000: Debit Credit Cash 15000 Accumulated depreciation-Machinery 57600 Gainon sale of Machinery 600 Machinery 72000 c) Insurance claim settled for $18000: Debit Credit Cash 18000 Accumulated depreciation-Machinery 57600 Compensation gain on machiney destroyed by fire 3600 Machinery 72000

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