Required information [The following information applies to the questions display

Question

Required information [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. 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 $21,500 cash 2. Record the sale of the used machine for $86,000 cash. 3. Record the insurance settlement received of $32,000 resulting from the total destruction of the machine in a fire

Explanation / Answer

January 2 Dr Machine $288,000 Cr Cash $288,000 January 3 Dr Machine $10,000 Cr Cash $10,000 January 3 Dr Machine $2,000 Cr Cash $2,000 Total cost of machine = $300,000 Annual depreciation = ($300,000 - $34,560)/6 = $44,240 Journal entries to record depreciaton of the machine at December 31 of each year Dr Depreciation expense $44,240 Cr Accumulated depreciation - machine $44,240 At the end of its fifth year, accumulated depreciation = $44,240 x 5 = $221,200, and the book value = $78,800 Prepare journal entries to record the machine’s disposal under each of the following separate assumptions: 1. It is sold for $21,500 cash. Dr Cash 21,500 Dr Accum depn 221,200 Dr Loss on sale of machine 57,300 Cr Machine 300,000 2. It is sold for $86,000 cash. Dr Cash 86,000 Dr Accum depn 221,200 Cr Machine 300,000 Cr Gain on sale of machine 7,200 3. It is destroyed in a fire and the insurance company pays $32,000 cash to settle the loss claim. Dr Cash 32,000 Dr Accum depn 221,200 Dr Loss of machine from fire 46,800 Cr Machine 300,000

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.