Question

Problem 8-6A Disposal of plant assets LO C1, P1, P2 [The following information applies to the questions displayed below.) Onslow Co. purchases a used machine for $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. Problem 8-6A Part 2 2. Prepare journal entries to record depreciation of the machine at December 31. View transaction list Journal entry worksheet Record the first year year-end adjusting entry for the depreciation expense of the used machine.

Answer 1

Solution

Date	Accounts title	Debit	Credit
Dec 31-Year 1	Depreciation expense-Machine	$ 44,240
	Accumulated Depreciation - Machine		$ 44,240
	(depreciation expense recorded)

Working

Straight line Method
A	Cost	$ 300,000
B	Residual Value	$ 34,560
C=A - B	Depreciable base	$ 265,440
D	Life [in years left ]	6
E=C/D	Annual SLM depreciation	$             44,240.00

Cost to make asset ready to use will be added to the cost of machine.