December 31, 2014, Trapp, Inc. has a machine with a book value of $940,000. The original cost and related accumulated depreciation at this date are as follows.
Machine $1,300,000
Less: Accumulated depreciation 360,000
Book Value 940,000
Depreciation is computed at $60,000 per year on a straight - line basis.
Presented below is a set of independent situations. For each independent situation, indicate the journal entry to be made to record the transaction. Make sure that depreciation entries are made to update the book value of the machine prior to its disposal.
1. A fire completely destroys the machine on August 31, 2015. An insurance settlement of $430,000 was received for this casualty. Assume the settlement was received immediately.
Record current depreciation
Record loss of the machine
2. On April 1, 2015, Trapp sold the machine for $1,040,000 to Denim Co.
Record current depreciation
Record sale of the machine
3. On July 31, 2015, the company donated this machine to Magic Council. The fair value of the machine at the time of the donation was estimated to be $1,100,000.
Record current depreciation
Record donation of the machine