Question

Onslow Co. purchases a used machine for $288,000 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 $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. 3. Prepare journal entries to record the machine's disposal under each of the following separate assumptions: Record the sale of the used machine for $22,500 cash. Record the sale of the used machine for $90,000 cash. Record the insurance settlement received of $33,000 resulting from the total destruction of the machine in a fire

Answer 1

a) Journal entry

Date	account and explanation	Debit	Credit
	Cash	22500
	Accumulated depreciation-Machine (297600-34560/6*5)	219200
	Loss on sale of machine	55900
	Machine		297600
	(To record sale of machine)

b) Journal entry

Date	account and explanation	Debit	Credit
	Cash	90000
	Accumulated depreciation-Machine (297600-34560/6*5)	219200
	gain on sale of machine		11600
	Machine		297600
	(To record sale of machine)

c) Journal entry

Date	account and explanation	Debit	Credit
	Cash	33000
	Accumulated depreciation-Machine (297600-34560/6*5)	219200
	Loss on destruction of machine	45400
	Machine		297600
	(To record sale of machine)