On October 1st 2020 the Empire Company purchased the Millenium Falcon for $4,000,000.

The Millenium Falcon is expected to serve the Empire for 12 years and have a $200,000 salvage.

The Empire Company expects to drive the Heathrow 38,000,000 miles.

In 2020 The Empire drove the Falcon 2,000,000 miles in 2021 the Empire drove the Falcon 5,000,000 miles.

REQUIRED:

a) On January 2nd 2022, The Millenium Falcon was destroyed in an asteriod storm. The Jabba-The-Hut Insurance company promptly paid $2,900,000 on the insurance claim. Make the journal entry the Empire makes because of this storm and insurance payment. The Empire was using units of activity depreciation.

b) On January 3rd, 2022; the Empire exchanged the Millenium Falcon and $1,200,000 for a Death Star. The Death Star has a fair market value of $4,700,000. The Empire had depreciated the Falcon with the units of activity method. Make the journal entry for Empire exchanging the Millenium Falcon for a Death Star.