Question

Onslow Co. purchases a used machine for $144,000 cash on January 2 and readies it for use the next day at a $6,000 cost. On January 3, it is installed on a required operating platform costing $1,200, and it is further readied for operations. The company predicts the machine will be used for six years and have a $17,280 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:

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:

Record the purchase of a used machine for $144,000 cash.

Record the costs of $6,000 incurred on the used machine.

Record the cost of $1,200 for an operating platform.

2. Prepare journal entries to record depreciation of the machine at December 31:

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

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

3. Prepare journal entries to record the machine's disposal under each of the following separate assumptions:

Record the sale of the used machine for $20,500 cash.

Record the sale of the used machine for $82,000 cash.

Record the insurance settlement received of $31,000 resulting from the total destruction of the machine in a fire.

Answer 1