Question

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Onslow Co. purchased a used machine for $178,000 cash on January 2. On January 3, Onslow paid $2,840 to wire electricity to the machine and an additional $1,160 to secure it in place. The machine will be used for six years and have a $14,000 salvage value. Straight-line depreciation is used. 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 separate situation: (a) it is sold for $15,000 cash; (b) it is sold for $50,000 cash; and (c) it is destroyed in a fire and the insurance company pays $30,000 cash to settle the loss claim.

Answer 1

3a) Journal entry

No	General Journal	Debit	Credit
	Cash	15000
	Accumulated depreciation-Machine (182000-14000/6)*5	140000
	Loss on sale of machine	27000
	Machine		182000
	(To record disposal of machine)

3b) Journal entry

No	General Journal	Debit	Credit
	Cash	50000
	Accumulated depreciation-Machine (182000-14000/6)*5	140000
	Gain on sale of machine		8000
	Machine		182000
	(To record disposal of machine)

3c) Journal entry

No	General Journal	Debit	Credit
	Cash	30000
	Accumulated depreciation-Machine (182000-14000/6)*5	140000
	Loss on disposal of machine	12000
	Machine		182000
	(To record disposal of machine)