Question

Onslow Co. purchases a used machine for $192,000 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 $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.

a. Record the first year year-end adjusting entry for the depreciation expense of the used machine.

b.Record the year of disposal year=end adjusting entry for the depreciation expense of the used machine.

Answer 1

Journal entries are given below:

Event	Date	General Journal	Debit	Credit
a)	Dec 31(Year 1)	Depreciation expense - Machinery *	$29,760
		Accumulated Depreciation - Machinery		$29,760
b)	Dec 31 (Year 5)	Depreciation expense - Machinery	$29,760
		Accumulated Depreciation - Machinery		$29,760

* Depreciation under straight line method = Cost - salvage value / life of asset

Cost of the asset = $192,000 + $80,000 + $1,600 = $201,600

Depreciation per year = $201,600 - $23,040 / 6years = $29,760