The following information applies to the questions displayed below.] Onslow Co.
ID: 2499122 • Letter: T
Question
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 $10,000 cost. On January 3, it is installed on a required operating platform costing $2,000, 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. 43, Award: O out of 5.00 points 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. Date General Journal Debit Credit Jan 02 Jan 03 Jan 03Explanation / Answer
Journal entries in the books of Onslow Co.
1. Journal entries to record the machine's purchase and the costs to rady and install it.
Date Account Titles and Explanation Debit Credit
Jan. 2, Machine $2,40,000
Cash $2,40,000
(Purchase of Machine)
Jan. 3, Machine $10,000
Cash $10,000
(expenses for ready to use)
Jan. 3, Machine $2,000
Cash $2,000
(expenses for ready for operation)
2. Jornal entry to record depreciation of the machine
Total cost of the Machine $2,52,000
Salvage Value $28,800
Life of the machine (years) 6
Depreciation per annum ($ 252,000 - $ 28,800)/6 $37,200
a. its first year of operation
Date Account Titles and Explanation Debit Credit
Dec. 31, Depreciation expense $37,200
Accumulated Depreciation $37,200
(Depreciation on straight line basis in the first year)
a. the year of its disposal
Date Account Titles and Explanation Debit Credit
Dec. 31, Depreciation expense $37,200
Accumulated Depreciation $37,200
(Depreciation on straight line basis in the year of disposal)
3. Journal entry to be recorded on machines disposal under each of the following assumption
Accumulated depreciation at the end of the fifth year ($ 37,200 x 5) $1,86,000
Book Value ($ 252,000 - $ 186,000) $66,000
a. It is sold for $ 24,500 cash at the end of the fifth year
Date Account Titles and Explanation Debit Credit
Dec. 31, Cash $24,500
Accumulated Depreciation $1,86,000
Loss on sale of machine $41,500
Machine $2,52,000
(Disposal of machine at the end of the fifth year)
a. It is sold for $ 98,000 cash at the end of the fifth year
Date Account Titles and Explanation Debit Credit
Dec. 31, Cash $98,000
Accumulated Depreciation $1,86,000
Machine $2,52,000
Gain on sale of machine $32,000
(Disposal of machine at the end of the fifth year)
c. It is distroyed in a fire and the insurance company pays $ 35,000 cash to settle the loss claim
Date Account Titles and Explanation Debit Credit
Dec. 31, Cash $35,000
Accumulated Depreciation $1,86,000
Loss of machine from fire $31,000
Machine $2,52,000
(Loss of machine due to fire and compensation received from insurance company)
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