A Company Purchased and Installed a Machine on January 1,2006

question 88

Essay

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

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Definitions:

Comparative Advantage

The ability of a country, firm, or individual to produce a particular good or service at a lower opportunity cost than others, leading to more efficient trade outcomes.

PPCs (Production Possibility Curves)

Graphical representations that show the maximum possible output combinations of two goods that an economy can achieve when all resources are fully and efficiently utilized.

Specialization

The process of concentrating on and becoming expert in a particular subject or skill, often leading to increased efficiency and productivity.

Gains From Trade

The extra output that trading partners obtain through specialization of production and exchange of goods and services.