On December 31, 2025, Novak Inc. has a machine with a book value of $1,410,000. The original cost and related accumulated
depreciation at this date are as follows.
Machine
$1,950,000
Less: Accumulated depreciation
540,000
Book value
$1,410,000
Depreciation is computed at $90,000 per year on a straight-line basis.
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.
(a)
-
Your answer is partially correct.
A fire completely destroys the machine on August 31, 2026. An insurance settlement of $645,000 was received for this casualty.
Assume the settlement was received immediately. (Credit account titles are automatically indented when amount is entered. Do not
indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. List all debit entries before
credit entries.)
Date
Account Titles and Explanation
Debit
Credit
Aug. 31, 2026
Depreciation Expense
45000
Accumulated Depreciation - Machinery
450
(To record current depreciation.)
Aug. 31, 2026
Cash
645000