A-54 A machine costing $171,600 was destroyed when it caught fire. At the date of the fire, the accumulated depreciation on the machine was $84,000. An insurance check for $203,800 was received based on the replacement cost of the machine. The entry to record the insurance proceeds and the disposition of the machine will include a: a) gain on disposal of $116,200. b) credit to the Equipment account for $119,800. c) gain on disposal of $32,200. d) credit to the Accumulated Depreciation account for $84,000. A-55 Gains on the cash sales of fixed assets A) are the excess of the book value over the cash proceeds. B) are part of cash flows from operations. C) are reported on a net-of-tax basis if material. D) are the excess of the cash proceeds over the book value of the assets sold. A-56 Machinery purchased for $53,000 by Carver Co. in 2006 was originally estimated to have a life of 8 years with a salvage value of $5,000 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2011, it is determined that the total estimated life should be 10 years with a salvage value of $5,500 at the end of that time. Assume straight-line depreciation. a) Prepare the entry to correct the prior years' depreciation, if necessary. b) Prepare the entry to record depreciation for 2011.
A-54 A machine costing $171,600 was destroyed when it caught fire. At the date of the fire, the accumulated depreciation on the machine was $84,000. An insurance check for $203,800 was received based on the replacement cost of the machine. The entry to record the insurance proceeds and the disposition of the machine will include a: a) gain on disposal of $116,200. b) credit to the Equipment account for $119,800. c) gain on disposal of $32,200. d) credit to the Accumulated Depreciation account for $84,000. A-55 Gains on the cash sales of fixed assets A) are the excess of the book value over the cash proceeds. B) are part of cash flows from operations. C) are reported on a net-of-tax basis if material. D) are the excess of the cash proceeds over the book value of the assets sold. A-56 Machinery purchased for $53,000 by Carver Co. in 2006 was originally estimated to have a life of 8 years with a salvage value of $5,000 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2011, it is determined that the total estimated life should be 10 years with a salvage value of $5,500 at the end of that time. Assume straight-line depreciation. a) Prepare the entry to correct the prior years' depreciation, if necessary. b) Prepare the entry to record depreciation for 2011.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:A-54
A machine costing $171,600 was destroyed when it caught fire. At the date of the fire, the
accumulated depreciation on the machine was $84,000. An insurance check for $203,800 was
received based on the replacement cost of the machine. The entry to record the insurance
proceeds and the disposition of the machine will include a:
a) gain on disposal of $116,200.
b) credit to the Equipment account for $119,800.
c) gain on disposal of $32,200.
d) credit to the Accumulated Depreciation account for $84,000.
A-55
Gains on the cash sales of fixed assets
A) are the excess of the book value over the cash proceeds.
B) are part of cash flows from operations.
C) are reported on a net-of-tax basis if material.
D) are the excess of the cash proceeds over the book value of the assets sold.
A-56
Machinery purchased for $53,000 by Carver Co. in 2006 was originally estimated to have a life of
8 years with a salvage value of $5,000 at the end of that time. Depreciation has been entered for
5 years on this basis. In 2011, it is determined that the total estimated life should be 10 years with
a salvage value of $5,500 at the end of that time. Assume straight-line depreciation.
a) Prepare the entry to correct the prior years' depreciation, if necessary.
b) Prepare the entry to record depreciation for 2011.
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