Saturn Co. purchases a used machine for $192,000 cash on January 2 and readies i
ID: 2422642 • Letter: S
Question
Saturn Co. purchases a used machine for $192,000 cash on January 2 and readies it for use the next day at an $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 $23,040 salvage value. Depreciation is to be charged on a straight-line basis. On December 31, at the end of its fifth year in operations, it is disposed of.
Prepare journal entries to record the machine's purchase and the costs to ready and install it. Cash is paid for all costs incurred. (Omit the "$" sign in your response.)
Prepare journal entries to record depreciation of the machine at December 31. (Omit the "$" sign in your response.)
Its first year in operations.
The year of its disposal.
Prepare journal entries to record the machine’s disposal under each of the following separate assumptions (Omit the "$" sign in your response):
It is sold for $24,000 cash.
It is sold for $96,000 cash.
Saturn Co. purchases a used machine for $192,000 cash on January 2 and readies it for use the next day at an $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 $23,040 salvage value. Depreciation is to be charged on a straight-line basis. On December 31, at the end of its fifth year in operations, it is disposed of.
Required: 1.Prepare journal entries to record the machine's purchase and the costs to ready and install it. Cash is paid for all costs incurred. (Omit the "$" sign in your response.)
2.Prepare journal entries to record depreciation of the machine at December 31. (Omit the "$" sign in your response.)
(a)Its first year in operations.
(b)The year of its disposal.
3.Prepare journal entries to record the machine’s disposal under each of the following separate assumptions (Omit the "$" sign in your response):
(a)It is sold for $24,000 cash.
(b)It is sold for $96,000 cash.
(c) It is destroyed in a fire and the insurance company pays $34,500 cash to settle the loss claim.
Explanation / Answer
Ans 1 Date Ledger Name Debit Credit Jan-02 Machinery 1,99,200.00 Cash 1,99,200.00 Note: All the necessary cost incurred to bring the asset for the intended use is capitalized. Ans 2 Dec-31 Depreciation-Machinery 29,360.00 Accumulated Depreciation 29,360.00 Depreciable Amount=Cost-Salvage Value 1,76,160.00 Expected useful Life 6.00 Depreciation Amount for the year =176160/6 29,360.00 Ans 3 (a) Accumulated Depreciation 29,360.00 Loss On sale of machinery 1,45,840.00 Cash 24,000.00 Machinery 1,99,200.00 Ans 3 (b) Accumulated Depreciation 29,360.00 Loss On sale of machinery 73,840.00 Cash 96,000.00 Machinery 1,99,200.00 Ans 3 (c) Accumulated Depreciation 29,360.00 Loss on fire 73,840.00 Cash 96,000.00 Machinery 1,99,200.00
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