Reference no: EM132951683
Question - On April 1, 2020, one of the two large production machines used by Evert Company stripped a gear, causing major internal damage. On April 5, 2020, the company decided to purchase a new machine (cost of $474,500) so that production could continue. On January 1, the accounts showed the following for the old machine: original cost, $234,000; accumulated depreciation, $163,800 (20-year life; no residual value). The company did not accept a trade-in offer of $35,100. Instead, the old machine was sold on April 5 to another company for $62,400. Evert spent $7,800 cleaning and $2,600 moving the machine prior to shipping. Insurance premiums (prepaid) on the old machine were $1,170; the unused portion of the premium is applied to the new machine. That insurance was paid on January 1 and covered the period January 1 through December 31.
Required -
a. Record the entry for Evert Company to purchase equipment on April 5, 2020.
b. Record the entries for Evert Company on April 5, 2020, to dispose of the old machine, including any required updates for depreciation and for insurance expense.
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