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:

Cost Reconciliation

The process of verifying the cost of goods sold by comparing the beginning and ending inventories, plus purchases, with the total goods available for sale.

Work in Process Inventory

This represents the cost of unfinished goods in the manufacturing process at a certain point in time.

FIFO Method

FIFO Method, an acronym for "First In, First Out," is an inventory valuation method where goods purchased or produced first are sold or used first.

Conversion Costs

Costs required to convert raw materials into finished goods, typically including direct labor and manufacturing overhead expenses.