Question

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Onslow Co. purchased a used machine for $192,000 cash on January 2. On January 3, Onslow paid $6,000 to wire electricity to the machine and an additional $1,200 to secure it in place. The machine will be used for six years and have a $23,040 salvage value. Straight-line depreciation is used. On December 31, at the end of its fifth year in operations, it is disposed of.

3. 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.

Journal entry Qs:

1. Record the sale of the used machine for $21,000 cash.

2. Record the sale of the used machine for $84,000 cash.

3.Record the insurance settlement received of $31,500 resulting from the total destruction of the machine in a fire.

Answer 1

Total cost of Machine and accumulated depreciation after 5 years:
Cost of Machine				192000
Add: cost to wire electricity			6000
Add: Installation cost			1200
Total cost of Machine			199200
Less: Estimated Salvage value			-23040
Depreciable cost				176160
Divide: Life				6
Annual depreciation				29360
Accumulated dep balance after 5 years (29360*5)	146800
Journal entries
S.no.	Accounts title and explanations		Debit $	Credit $
Case-1
	Cash account			21000
	Accumulated dep			146800
	Loss on sale of Assets		31400
	Machine equipment			199200
	(for sale of assets)
Case-2
	Cash account			84000
	Accumulated dep			146800
	Gain on sale of assets			31600
	Machine equipment			199200
	(for sale of assets)
Case-3
	Cash account			31500
	Accumulated dep			146800
	Loss on sale of Assets		20900
	Machine equipment			199200
	(for sale of assets)