On December 31, 2007 the Al Hamsi Establishment purchased a machine with a cost of AED 4,400,000 having an estimated residual value of 400,000 and 10 years useful life. On December 31, 2015 the machine had a book value of AED 800,000 and related accumulated depreciation at this date AED 3,200,000. Machine AED 4,000,000 Debit balance Less: Accumulated depreciation 3,200,000 Credit balance Book value 800,000

Required:

a) If the machine was completely destroyed by fire on September 30, 2016 and the insurance company paid the Al Hamsi Establishment AED 400,000 in settlement of the casualty. Indicate the journal entry to be made to record the transaction, taking into account that the depreciation has to be updated until the date of the fire loss September 30, 2016. (Show all calculations)

b) If the machine was completely destroyed by fire on September 30, 2016 and the insurance company paid the Al Hamsi Establishment AED 700,000 in settlement of the casualty. Indicate the journal entry to be made to record the transaction, taking into account that the depreciation has to be updated until the date of the fire loss September 30, 2016. (Show all calculations)