Question

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 in operations, it 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.

a) Record the purchase of a used machine for $192,000 cash.

B) Record the costs of $6,000 incurred on the used machine

C) Record the cost of $1,200 for an operating platform.

A) Record the first year year-end adjusting entry for the depreciation expense of the used machine.

B) Record the year of disposal year-end adjusting entry for the depreciation expense of the used machine.

A) Record the sale of the used machine for $23,000 cash.

B) Record the sale of the used machine for $92,000 cash.

C) Record the insurance settlement received of $33,500 resulting from the total destruction of the machine in a fire.

Answer 1

Date	General Journal	Debit	Credit
2-Jan	Machine	192000
	Cash		192000
3-Jan	Machine	6000
	Cash		6000
3-Jan	Machine	1200
	Cash		1200
a	Depreciation expense	29360
	Accumulated depreciation		29360
b	Depreciation expense	29360
	Accumulated depreciation - machine		29360
A	sale of the used machine for $23,000
	Cash	23000
	Accumulated depreciation - machine 29360*5	146800
	Loss on sale of machine	29400
	Machine		199200
B	sale of the used machine for $92,000 cash.
	Cash	92000
	Accumulated depreciation - machine 29360*5	146800
	Gain on sale of machine		39600
	Machine		199200
C	destruction of the machine in a fire.
	Cash	33500
	Accumulated depreciation - machine 29360*5	146800
	Loss on sale of machine	18900
	Machine		199200

Total cost of machine 192000+6000+1200	199200
Depriciation (199200-23,040)/6	29360