Chapter 10, Problem 17E

Requirement-1:

To determine

To prepare: The journal entries to record the partial year depreciation and disposal of machine on July 1, 2019, if the machine is sold for $45,500 cash

Answer to Problem 17E

Solution: The journal entries to record the partial year depreciation and disposal of machine are as follows:

Journal entries
Date	Account titles	Debit	Credit
Jul. 1, 2019	Depreciation Expense- Machine	$ 7,500
	Accumulated Depreciation- Machine		$ 7,500
Jul. 1, 2019	Cash	$ 45,500
	Accumulated Depreciation- Machine	$ 67,500
	Gain on sale of Machine		$ 8,000
	Machine		$ 105,000

Explanation of Solution

Explanation:



The journal entries to record the partial year depreciation and disposal of machine are explained as follows:

Journal entries
Date	Account titles	Debit	Credit
Jul. 1, 2019	Depreciation Expense- Machine	$ 7,500
	Accumulated Depreciation- Machine		$ 7,500
	(Being partial year depreciation recorded for the year 2019)
Jul. 1, 2019	Cash	$ 45,500
	Accumulated Depreciation- Machine	$ 67,500
	Gain on sale of Machine 45500-(105000-67500)		$ 8,000
	Machine		$ 105,000
	(Being machine sold for cash)

Working note:

Calculation of Straight line method depreciation:
Cost (A)	$ 105,000
Salvage Value (B)	$ -
Life Years (C)	7
Annual Straight Line Depreciation =(A-B)/C =	$ 15,000
Number of months asset used in the year 2019 (Jan. 1 to July 1, 2019 )	6
Depreciation for the year 2019 = 15000*6/12 =	$ 7,500
Depreciation for first 4 years (2015 to 2018) = 15000*4 =	$ 60,000
Accumulated depreciation balance as on July 1, 2019 = (60000+7500)=	$ 67,500

Conclusion

Conclusion:

Hence, the journal entries are prepared to record the partial year depreciation and disposal of the machine.

Requirement-2:

To determine

To prepare: The journal entries to record the partial year depreciation and disposal of machine on July 1, 2019, if the machine is destroyed and insurance claim received is $25,000

Answer to Problem 17E

Solution: The journal entries to record the partial year depreciation and disposal of machine are as follows:

Journal entries
Date	Account titles	Debit	Credit
Jul. 1, 2019	Depreciation Expense- Machine	$ 7,500
	Accumulated Depreciation- Machine		$ 7,500
Jul. 1, 2019	Cash	$ 25,000
	Accumulated Depreciation- Machine	$ 67,500
	Loss on sale of Machine	$ 12,500
	Machine		$ 105,000

Explanation of Solution

Explanation:



The journal entries to record the partial year depreciation and disposal of machine are explained as follows:

Journal entries
Date	Account titles	Debit	Credit
Jul. 1, 2019	Depreciation Expense- Machine	$ 7,500
	Accumulated Depreciation- Machine		$ 7,500
	(Being partial year depreciation recorded for the year 2019)
Jul. 1, 2019	Cash	$ 25,000
	Accumulated Depreciation- Machine	$ 67,500
	Loss on sale of Machine (105000-67500)-25,000	$ 12,500
	Machine		$ 105,000
	(Being insurance claim received for machine destroyed in fire)

Working note:

Calculation of Straight line method depreciation:
Cost (A)	$ 105,000
Salvage Value (B)	$ -
Life Years (C)	7
Annual Straight Line Depreciation =(A-B)/C =	$ 15,000
Number of months asset used in the year 2019 (Jan. 1 to July 1, 2019 )	6
Depreciation for the year 2019 = 15000*6/12 =	$ 7,500
Depreciation for first 4 years (2015 to 2018) = 15000*4 =	$ 60,000
Accumulated depreciation balance as on July 1, 2019 = (60000+7500)=	$ 67,500

Conclusion

Conclusion:

Hence, the journal entries are prepared to record the partial year depreciation and disposal of the machine.