Question

In: Accounting

On January 1, Walker purchases a used machine for $150,000 and readies it for use the...

On January 1, Walker purchases a used machine for $150,000 and readies it for use the next day at a cost of $3,510. On January 4, it is mounted on a required operating platform costing $4,600, and it is further readied for operations. Management estimates the machine will be used for seven years and have an $18,110 salvage value. Depreciation is to be charged on a straight-line basis. On December 31, at the end of its sixth year of use, the machine is disposed of.

Required:

  1. Prepare journal entries to record the machine's purchase and the costs to ready and install it. Cash is paid for all costs incurred.
  2. Prepare journal entries to record depreciation of the machine at December 31 of (a) its first year in operations and (b) the year of its disposal.
  3. Prepare journal entries to record the machine's disposal under each of the following separate assumptions: (a) it is sold for $28,000 cash; (b) it is sold for $52,000 cash; and (c) it is destroyed in a fire and the insurance company pays $25,000 cash to settle the loss claim.

Solutions

Expert Solution

Annual depreciation:
Total cost (150000+3510+4600) 158110
Less: Salvage value 18110
Deprecoable cost 140000
Divide: Lie 7
Annual depreciation: 20000
Journal entries
S.no. Accounts title and explanations Debit $ Credit
0101. Year1 machine equipment 150000
     Cash account 150000
(for purchase of machine)
02.01. Yr01 machine equipment 3510
     Cash account 3510
(for installation charges)
04.01. yr01 machine equipment 4600
     Cash account 4600
(fr installation of platform)
b.
31.12.Yr01 Depreciation expense 20000
    Accumulated dep-Equipment 20000
(for depreciation charged)
31.12 Yr06 Depreciation expense 20000
    Accumulated dep-Equipment 20000
(for depreciation charged)
c.
Case-a
31.12.Yr06 Accumulated dep-Equipment 120000
Cash 28000
Loss on sale of Assets 10110
    Machine equipment 158110
(for sale of equipment)
case-b
31.12.Yr06 Accumulated dep-Equipment 120000
Cash 52000
    Gain on sale of assets 13890
    Machine equipment 158110
(for sale of equipment)
case-c
31.12.Yr06 Accumulated dep-Equipment 120000
Cash 25000
Loss on sale of Assets 13110
    Machine equipment 158110
(for claim from insurance on equipment)

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Onslow Co. purchases a used machine for $288,000 cash on January 2 and readies it for...
Onslow Co. purchases a used machine for $288,000 cash on January 2 and readies it for use the next day at a $10,000 cost. On January 3, it is installed on a required operating platform costing $2,000, and it is further readied for operations. The company predicts the machine will be used for six years and have a $34,560 salvage value. Depreciation is to be charged on a straight-line basis. On December 31, at the end of its fifth year...
Onslow Co. purchases a used machine for $178,000 cash on January 2 and readies it for...
Onslow Co. purchases a used machine for $178,000 cash on January 2 and readies it for use the next day at a $2,840 cost. On January 3, it is installed on a required operating platform costing $1,160, and it is further readied for operations. The company predicts the machine will be used for six years and have a $14,000 salvage value. Depreciation is to be charged on a straight-line basis. On December 31, at the end of its fifth year...
Onslow Co. purchases a used machine for $178,000 cash on January 2 and readies it for...
Onslow Co. purchases a used machine for $178,000 cash on January 2 and readies it for use the next day at a $2,840 cost. On January 3, it is installed on a required operating platform costing $1,160, and it is further readied for operations. The company predicts the machine will be used for six years and have a $14,000 salvage value. Depreciation is to be charged on a straight-line basis. On December 31, at the end of its fifth year...
Onslow Co. purchases a used machine for $144,000 cash on January 2 and readies it for...
Onslow Co. purchases a used machine for $144,000 cash on January 2 and readies it for use the next day at a $8,000 cost. On January 3, it is installed on a required operating platform costing $1,600, and it is further readied for operations. The company predicts the machine will be used for six years and have a $17,280 salvage value. Depreciation is to be charged on a straight-line basis. On December 31, at the end of its fifth year...
Onslow Co. purchases a used machine for $192,000 cash on January 2 and readies it for use the next day at a $6,000 cost.
Onslow Co. purchases a used machine for $192,000 cash on January 2 and readies it for use the next day at a $6,000 cost. On January 3, it is installed on a required operating platform costing $1,200, and it is further readied for operations. The company predicts the machine will be used for six years and have a $23,040 salvage value. Depreciation is to be charged on a straight-line basis. On December 31, at the end of its fifth year...
1. On January 1, 2015, Reno Inc. purchased a machine for $150,000. The machine has an...
1. On January 1, 2015, Reno Inc. purchased a machine for $150,000. The machine has an estimated five year life, and no residual value. Double declining balance depreciation has been used for financial statement reporting and CCA for income tax reporting. Effective January 1, 2018, Reno decided to change to straight-line depreciation for this machine, and treated the change as a change in accounting policy. For calendar 2018, Reno’s pre-tax income before depreciation on this asset is $125,000. Their income...
Wildcat, Inc. purchases a machine on January 1, 2016 at a cost of $555,000.  The machine will...
Wildcat, Inc. purchases a machine on January 1, 2016 at a cost of $555,000.  The machine will be depreciated over a 8-year useful life by using the double-declining balance method.  The managers estimate that the machine will have a salvage value of $50,00 at the end of its useful life.  What is the machine's carrying amount at December 31, 2018? a. $416,250 b. $312,188 c. $234,141 d. $175,605
On February 28, 20X1, your company purchases a machine for $150,000 with an estimated useful life...
On February 28, 20X1, your company purchases a machine for $150,000 with an estimated useful life of last 10 years and a salvage value of $10,000. Your company uses SYD depreciation and depreciates assets purchased between the 1st and 15th of the month for the entire month; assets purchased after the 15th of the month are treated as though they were acquired the following month. What is 20X1 depreciation expense? $22,727 $27,273 $25,455 $21,212
Rayya Co. purchases and installs a machine on January 1, 2017, at a total cost of...
Rayya Co. purchases and installs a machine on January 1, 2017, at a total cost of $134,400. Straight-line depreciation is taken each year for four years assuming a eight-year life and no salvage value. The machine is disposed of on July 1, 2021, during its fifth year of service.    Prepare entries to record the partial year’s depreciation on July 1, 2021, and to record the disposal under the following separate assumptions: (1) The machine is sold for $67,200 cash....
Rayya Co. purchases and installs a machine on January 1, 2016, at a total cost of...
Rayya Co. purchases and installs a machine on January 1, 2016, at a total cost of $142,800. Straight-line depreciation is taken each year for four years assuming a eight-year life and no salvage value. The machine is disposed of on July 1, 2020, during its fifth year of service. Prepare entries to record the partial year’s depreciation on July 1, 2020. Record the depreciation expense as of July 1, 2020. Prepare entries to record the disposal under the following separate...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT