Disposal of Plant Asset

Citano Company has a used executive charter plane that originally cost $850,000. Straight-line depreciation on the plane has been recorded for six years, with a $70,000 expected salvage value at the end of its estimated eight-year useful life. The last depreciation entry was made at the end of the sixth year. Eight months into the seventh year, Citano disposes of the plane.

Required

Prepare journal entries to record: a. Depreciation expense to the date of disposal. b. Sale of the plane for cash at its book value. c. Sale of the plane for $215,000 cash. d. Sale of the plane for $195,000 cash. e. Destruction of the plane in a fire. Citano expects a $190,000 insurance settlement.

General Journal Reference Description Debit Credit a. To record depreciation expense for 8 months. b. Cash To record sale of airplane. C. Cash Airplane To record sale of airplane. d. Cash Accumulated Depreciation Airplane To record sale of airplane