Citano Company has a used executive charter plane that originally cost $850,000.
ID: 2521836 • Letter: C
Question
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 an $85,000 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 $220,000 cash.
d. Sale of the plane for $200,000 cash.
e. Destruction of the plane in a fire. Citano expects a $198,000 insurance settlement.
Explanation / Answer
a)
b)
c)
$ 7,500
d)
e)
Cost of plane $ 850,000 Less; Salvage value $ (85,000) Depreciable value $ 765,000 Life of the assets 8 years Depreciation per year ($765,000/8) $ 95,625 Accumulated depreciation as on end of sixth year ($95,625*6) $ 573,750