A Company Purchased and Installed a Machine on January 1,2010,at

question 85

Essay

A company purchased and installed a machine on January 1,2010,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 July 1,2013.
a.Prepare the general journal entry to update depreciation to July 1,2013.
b.Prepare the general journal entry to record the disposal of the machine under each of these three independent situations:
(1) The machine was sold for $22,000 cash.
(2) The machine was sold for $15,000 cash.
(3) The machine was totally destroyed in a fire and the insurance company settled the claim for $18,000 cash.

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Definitions:

Common Stock

A type of security that represents ownership in a corporation, granting shareholders voting rights and a share in the company's profits via dividends.

Stock Options

Financial instruments allowing the possessor to buy or sell shares at an agreed upon price before a certain deadline, without being compelled to do so.

Diluted Earnings

A measure of a company's profitability that accounts for all potential shares that could be issued, potentially lowering earnings per share.

Market Price

Market price refers to the current price at which an asset or service can be bought or sold in a given market.