Question

In: Accounting

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 in operations, it is disposed of.

1A) Prepare journal entries to record depreciation of the machine at December 31.

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

Note: Enter debits before credits.

Date General Journal Debit Credit
Dec 31

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

Note: Enter debits before credits.

Date General Journal Debit Credit
Dec 31

1B) Prepare journal entries to record the machine's disposal under each of the following separate assumptions:

Record the sale of the used machine for $20,000 cash.

Note: Enter debits before credits.

Date General Journal Debit Credit
Dec 31

Record the sale of the used machine for $80,000 cash.

Note: Enter debits before credits.

Date General Journal Debit Credit
Dec. 31

Record the insurance settlement received of $30,500 resulting from the total destruction of the machine in a fire.

Note: Enter debits before credits.

Date General Journal Debit Credit
Dec 31

Solutions

Expert Solution

Cost of machine
purchase price 288,000
Ready to use 10,000
cost of operating platform 2,000
Total cost of machine 300,000
Depreciation expense = (300,000-34,560)/6
44240
1A) Date Accounting titles & explanations Debit Credit
31-Dec Depreciation expense 44,240
Accumulated depreciation 44,240
31-Dec Depreciation expense 44,240
Accumulated depreciation 44,240
1b) 31-Dec Cash 20,000
Accumulated dep(44240*5) 221200
loss on sale of machine 58,800
Machine 300,000
31-Dec Cash 80,000
Accumulated dep(44240*5) 221200
Gain on sale of machine 1,200
Machine 300,000
31-Dec Cash 30,500
Accumulated dep(44240*5) 221200
loss on disposal 48,300
Machine 300,000

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