Question

MS - CHAPTER 8 0 Required information The following information applies to the questions displayed below.) Onslow Co. purchased a used machine for $144,000 cash on January 2. On January 3, Onslow paid $10,000 to wire electricity to the machine and an additional $2,000 to secure it in place. The machine will be used for six years and have a $17.280 salvage value. Straight-line depreciation is used. On December 31, at the end of its fifth year in op disposed of. 3. Prepare journal entries to record the machine's disposal under each separate situation: () it is sold for $22,500 cash: (o it is sold for $90,000 cash; and (it is destroyed in a fire and the insurance company pays $33,000 cash to settle the loss claim. View transaction list Journal entry worksheet Record the sale of the used machine for $22,500 cash. Note: Enter debits before credits. Debit Credit Date General Journal Dec 31 Cash < Prev of 8 Next

Answer 1

Total cost of machine = Purchase price+Cost of wiring+Installation cost

= $144,000+$10,000+$2,000 = $156,000

Straight line depreciation per year = (Total cost - Salvage Value)/Estimated useful life

= ($156,000 - $17,280)/6 yrs = $23,120 per year

Accumulated depreciation at the end of fifth year = $23,120*5 yrs = $115,600

The required journal entries to record the sale are shown as follows:- (Amounts in $)

No	Date	General Journal	Debit	Credit
a)	Dec 31	Cash	22,500
		Accumulated Depreciation-Machinery	115,600
		Loss on sale of machine (Bal fig)	17,900
		Machinery		156,000
		(To record the sale of machine)
b)	Dec 31	Cash	90,000
		Accumulated Depreciation-Machinery	115,600
		Gain on sale of machine (Bal fig)		49,600
		Machinery		156,000
		(To record the sale of machine)
c)	Dec 31	Cash (insurance claim received)	33,000
		Accumulated Depreciation-Machinery	115,600
		Loss from fire (Bal fig)	7,400
		Machinery		156,000
		(To record the receipt of insurance claim)