Disposal of Plant Asset

Citano Company has a used executive charter plane that originally cost $900,000. Straight-line depreciation on the plane has been recorded for six years, with a $90,000 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 $235,000 cash. d. Sale of the plane for $200,000 cash. e. Destruction of the plane in a fire. Citano expects a $205,000 insurance settlement.

Reference Debit Credit a. 0 66,825 0 66,825 General Journal Description Depreciation Expense - Airplane Accumulated Depreciation - Airplane To record depreciation expense for 8 months. Cash Accumulated Depreciation - Airplane Airplane To record sale of airplane. Cash b. 0 0 0 0 0 0 C. 0 0 0 0 Airplane 0 0 0 0 To record sale of airplane. Cash d. 0 0 0 0 Accumulated Depreciation - Airplane 0 0 0 0 To record sale of airplane. e. 0 0 0 0 Loss of insurance settlement Accumulated Depreciation - Airplane 0 0 0 0 To record insurance claim on airplane destroyed by fire