Optional: Problem #3 (Entries for Disposition of Assets)

On December 31, 2017, Autohome Inc. has a machine with a book value of $260,000. The original cost and related accumulated depreciation at this date are as follows.

Depreciation is computed at $72,000 per year on a straight-line basis.

Instructions

Presented below is a set of independent situations. For each independent situation, indicate the journal entry to be made to record the transaction. Make sure that depreciation entries are made to update the book value of the machine prior to its disposal.

1. A hurricane completely destroys the machine on October 31, 2018. An insurance settlement of $460,000 was received for this casualty. Assume the settlement was received immediately.

2. On June 1, 2018, Autohome sold the machine for $300,000.

3. On August 31, 2018, the company donated this machine to the Royal Palm Beach City Council. The fair value of the machine at the time of the donation was estimated to be $610,000.

Machine Accumulated depreciation Book value $980,000 720,000 $260,000