On December 31, 2017, Waterway Inc. has a machine with a book value of $1,146,80

Question

On December 31, 2017, Waterway Inc. has a machine with a book value of $1,146,800. The original cost and related accumulated depreciation at this date are as follows Machine Less: Accumulated depreciation Book value $1,586,000 439,200 $1,146,800 Depreciation is computed at $73,200 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) A fire completely destroys the machine on August 31, 2018. An insurance settlement of $524,600 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.) Debit Credit August 31, 2018 (To record current depreciation.) August 31, 2018 (To record loss of the machine.)

Explanation / Answer

Depreciation expense ($73,200/12*8 months) $ 48,800 Accumulated depreciation $ 48,800 (To record current depreciation) Cash $ 524,600 Accumulated depreciation ($48,800+$439,200) $ 488,000 Loss on disposal of machine $ 573,400 Machine $ 1,586,000 (To record loss of the machine)

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