A Company Purchased and Installed a Machine on January 1

question 193

Essay

A company purchased and installed a machine on January 1 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 of the fourth year.The company uses the calendar year.
1.Prepare the general journal entry to update depreciation to July 1 in the fourth year.
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:

Profit-Maximizing Level

The point at which a firm achieves the highest possible profit, typically where marginal costs equal marginal revenue.

Marginal Revenue

The additional income that a firm receives from selling one more unit of a good or service.

Demand Schedules

Tables that show the quantity of a good or service that consumers are willing and able to purchase at different price points.

Monopolistic Competitive Industry

A market structure where many firms sell products that are similar but not identical, allowing for competition based on factors other than price.