Task: A company purchased and installed a machine on January 1, 2004 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, 2007.
Question 1. Prepare the general journal entry to update depreciation to July 1, 2007.
Question 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.