Question 3

Ferris Co. purchased and installed a machine on January 1, 2011, at a total cost of $185,500. Straight-line depreciation was taken each year for four years, based on the assumption of a seven-year life and no residual value. The machine was disposed of on July 1, 2015, during its fifth year of service. Ferris's year-end is December 31.

Required

Present the entries to record the partial year's depreciation on July 1, 2015, and to record the disposal under each of the following unrelated assumptions:

1. The machine was sold for $70,000 cash.
2. Ferris received an insurance settlement of $60,000 resulting from the total destruction of the machine in a fire.