Question

Train Co. purchased a used machine for $288,000 cash on January 2. On January 3, Onslow paid $8,000 to wire electricity to the machine and an additional $1,600 to secure it in place. The machine will be used for six years and have a $34,560 salvage value. Straight-line depreciation is used. On December 31, at the end of its fifth year in operations, it is disposed of.

Prepare journal entries to record the machine's purchase and the costs to ready it for use. Cash is paid for all costs incurred.

Date	General Journal	Debit	Credit
Jan 02
Jan 03
Jan 03

Prepare journal entries to record depreciation of the machine at December 31. Record the 1st year year-end adjusting entry for the depreciation expense of the used machine. Record the year of disposal year end adjusting entry for the depreciation expense of the used machine.

Date	General Journal	Debit	Credit
Dec 31

Prepare journal entries to record the machine’s disposal under each separate situation: (a) it is sold for $21,000 cash; (b) it is sold for $84,000 cash; and (c) it is destroyed in a fire and the insurance company pays $31,500 cash to settle the loss claim.

Date	General Journal	Debit	Credit
Dec 31

Answer 1

Question 1
	Jan.02	Machinery		Dr	$ 288,000.00
			To Cash	Cr		$ 288,000.00
		Being Machinery purchased on cash
	Jan.03	Machinery		Dr	$     8,000.00
			To Cash	Cr		$     8,000.00
		Being Electrical cost paid to bring machine for intended use
	Jan.03	Machinery		Dr	$     1,600.00
			To Cash	Cr		$     1,600.00
		Being cost paid to secure machine its place
Question 2
	A) its first year of operation
	Dec.31	Depreciation		Dr	$   43,840.00
			To Accumulated depreciation	Cr		$   43,840.00
		Being Depreciation of machinery for year 1
	Calculation of Depreciation
		Machinery value-Salvage
		Useful life
		($297,600-$34,560)/6
		$                           43,840.00
	B)year of its disposal
	Dec.31	Depreciation		Dr	$   43,840.00
			To Accumulated depreciation	Cr		$   43,840.00
		Being depreciation of machinery for year 5
Question 3
	A) It is sold for $21,000 cash
	Dec.31, 5th year
		Cash		Dr	$   21,000.00
		Accumulated Depreciation		Dr	$ 219,200.00
		Loss on sale of Machinery		Dr	$   57,400.00
			To Machinery	Cr		$ 297,600.00
		Being Machinery sold to customer on loss
	B) It is sold for $84,000 cash
		Cash		Dr	$   84,000.00
		Accumulated Depreciation		Dr	$ 219,200.00
			To Machinery	Cr		$ 297,600.00
			To Gain on sale of Machinery			$     5,600.00
		Being Machinery sold to customer on profit
	C) It is destroyed in a fire and the insurance company pays $31,500 cash to settle the loss claim
		Cash		Dr	$   31,500.00
		Accumulated Depreciation		Dr	$ 219,200.00
		Loss on sale of Machinery		Dr	$   46,900.00
			To Machinery	Cr		$ 297,600.00
		Being machinery destroyed in a fire and claims received from insurance