Problem 10-6A Disposal of plant assets LO C1, P1, P2 [The following information

Question

Problem 10-6A Disposal of plant assets LO C1, P1, P2 [The following information applies to the questions displayed below.] Onslow Co. purchases a used machine for $240,000 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 $28,800 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 10-6A Part 1 Required: 1. Prepare journal entries to record the machine's purchase and the costs to ready and install it. Cash is paid for all costs incurred.

Explanation / Answer

Journal Date Particulars Debit Credit Year 1 $ $ Jan-02 Machine Account                                                                      Dr. 248000             To Cash 248000 (Being Machinery purchased for cash and its associated cost for its ready to use) Jan-03 Machinery account A/c                                                              Dr. 1600             To Cash 1600 (Being Installation cost for machinery)

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