Respuesta :
Answer and Explanation:
The Journal entry is shown below:-
a. Depreciation expense - Airplane Dr, $75000
To Accumulated depreciation - Airplane $75000
(Being depreciation expense for 8 months is recorded)
b. Cash Dr, $250,000
To Accumulated depreciation - Airplane $750,000
To Airplane $1,000,000
(Being the sale of airplane is recorded)
c. Cash Dr, $300,000
Accumulated depreciation - Airplane Dr, $750,000
To Airplane $1,000,000
To Gain on sale of airplane $50,000
(Being the sale of airplane is recorded)
d. Cash Dr, $220,000
Loss on sale of airplane Dr, $30,000
Accumulated depreciation - Airplane Dr, $750,000
To Airplane $1,000,000
(Being the sale of airplane is recorded)
e. Insurance settlement Dr, $210,000
Loss of insurance settlement Dr, $40,000
Accumulated depreciation - Airplane Dr, $750,000
To Airplane $1,000,000
(Being insurance claim on airplane destroyed by fire is recorded)
Working Note
Depreciation per year = (Cost of asset - Salvage value) ÷ Useful life
= ($1,000,000 - $100,000) ÷ 8 years
= $112,500
Now,
Accumulated depreciation for six years = $112,500 × 6 years
= $675,000
a. Depreciation expense for 8 months = $112,500 × 8 ÷ 12
= $75,000
b. Accumulated depreciation up to the date of disposal
= $675,000 + $75,000
= $750,000
Book value at the date of disposal
= $1,000,000 - $750,000
= $250,000
c.
Gain on sale of airplane = (Accumulated depreciation + Cash) - Cost of asset
= ($750,000 + $300,000) - $1,000,000
= $50,000
d.
Loss on sale of airplane = Cost of asset - (Accumulated depreciation + Cash)
= $1,000,000 - $750,000 + $220,000
= $30,000
e. Loss of insurance settlement = Cost of asset - (Accumulated depreciation + Insurance settlement)
= $1,000,000 - $750,000 + $210,000
= $40,000
Therefore with the above formula we have prepared the journal entries.
