Disposal of Plant Asset Citano Company has a used executive charter plane that o
ID: 2515433 • Letter: D
Question
Disposal of Plant Asset
Citano Company has a used executive charter plane that originally cost $850,000. Straight-line depreciation on the plane has been recorded for six years, with a $70,000 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 $215,000 cash.
d. Sale of the plane for $195,000 cash.
e. Destruction of the plane in a fire. Citano expects a $190,000 insurance settlement.
b. Cash Answer Answer AnswerAccumulated Depreciation - AirplaneAirplaneCashDepreciation Expense - AirplaneGain on Sale of Plant AssetsLoss of insurance settlementLoss on Sale of Plant AssetsReceivable from insurance company Answer Answer AnswerAccumulated Depreciation - AirplaneAirplaneCashDepreciation Expense - AirplaneGain on Sale of Plant AssetsLoss of insurance settlementLoss on Sale of Plant AssetsReceivable from insurance company Answer Answer To record sale of airplane.
c. Cash Answer Answer AnswerAccumulated Depreciation - AirplaneAirplaneCashDepreciation Expense - AirplaneGain on Sale of Plant AssetsLoss of insurance settlementLoss on Sale of Plant AssetsReceivable from insurance company Answer Answer Airplane Answer Answer AnswerAccumulated Depreciation - AirplaneAirplaneCashDepreciation Expense - AirplaneGain on Sale of Plant AssetsLoss of insurance settlementLoss on Sale of Plant AssetsReceivable from insurance company Answer Answer To record sale of airplane.
d. Cash Answer Answer AnswerAccumulated Depreciation - AirplaneAirplaneCashDepreciation Expense - AirplaneGain on Sale of Plant AssetsLoss of insurance settlementLoss on Sale of Plant AssetsReceivable from insurance company Answer Answer Accumulated Depreciation - Airplane Answer Answer AnswerAccumulated Depreciation - AirplaneAirplaneCashDepreciation Expense - AirplaneGain on Sale of Plant AssetsLoss of insurance settlementLoss on Sale of Plant AssetsReceivable from insurance company Answer Answer To record sale of airplane.
e. AnswerAccumulated Depreciation - AirplaneAirplaneCashDepreciation Expense - AirplaneGain on Sale of Plant AssetsLoss of insurance settlementLoss on Sale of Plant AssetsReceivable from insurance company Answer Answer Loss of insurance settlement Answer Answer Accumulated Depreciation - Airplane Answer Answer AnswerAccumulated Depreciation - AirplaneAirplaneCashDepreciation Expense - AirplaneGain on Sale of Plant AssetsLoss of insurance settlementLoss on Sale of Plant AssetsReceivable from insurance company Answer Answer To record insurance claim on airplane destroyed by fire.
Explanation / Answer
Depreciation for year :[cost- salvage ]/useful life
=[850000-70000]/8
= 97500
Total accumulted depreciation till sale : [97500*6]+65000= 650000
Date Account Debit credit a Depreciation expense 65000 Accumulated depreciation 65000 [depreciation for 8 month recorded 97500*8/12] b cash 20000 Accumulated depreciation -airplane 650000 Airplane 850000 c cash 215000 Accumulated depreciation 650000 Gain on Sale of Plant Assets 15000 Airplane 850000