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On July 31, 2021, the company donated this machine to the Mountain King City Council. The fair value of the machine at the time of the donation was estimated to be $1,430,000. (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.)

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Answer & Explanation:

Depreciation a/c ...dr

Loss a/c .....dr

Charity a/c .. dr        

          To machine a/c    

  • Machine amount = Machine cost value (eg, lets suppose = 2,000,000)
  • Charity amount = fair value of machine at time of donation = 1,4300,000. It is the amount that could have been otherwise received on machine sale, but is given as charity.
  • Accumulated depreciation is the total depreciation on machine upto date (eg, lets suppose = 5,00,000)
  • Loss = (Machine cost - accumulated depreciation) - current fair value

    Eg: If cost = 2,000,000 & accumulated depreciation = 5,00,000. Machine value should be = 2,000,000 - 5,00,000 = 15,000,000. The fall in value from 15,000,000 to 1,430,000 = 70,000 is loss on machine disposal.

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