Question

Problem 10-6A Disposal of plant assets LO C1, P1, P2 [The following information applies to the questions displayed below.] Onslow Co. purchases a used machine for $240,000 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 $28,800 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. Problem 10-6A Part 1 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.

Answer 1

Journal
Date	Particulars	Debit	Credit
Year 1		$	$
Jan-02	Machine Account                                                                      Dr.	248000
	To Cash		248000
	(Being Machinery purchased for cash and its associated cost for its ready to use)
Jan-03	Machinery account A/c                                                              Dr.	1600
	To Cash		1600
	(Being Installation cost for machinery)