Question

Required Information {The following information applies to the questions displayed below) Onslow Co. purchases a used machine for $192.000 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 $23,040 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: 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

Depreciation = ($192,000+ $10,000 + $2,000) = 204,000 -23,040/6 = $30,160 Accumulated Depreciation in 5 years= 30,160 x 5 = $150,800 Date Particular Debit Credit a) Cash a/c Dr. $21,000 Accumulated Depreciation a/c Dr. $150,800 Loss on sale of machinery a/c Dr. $32,200 To Machinery $204,000 b) Cash a/c Dr. $84,000 Accumulated Depreciation a/c Dr. $150,800 To Machinery $204,000 To Gain on sale of machinery $30,800 Cash a/c Dr. $31,500 Accumulated Depreciation a/c Dr. $150,800 Loss in fire a/c Dr. $21,700 To Machinery $204,000