Onslow Co. purchases a used machine for $178,000 cash on January 2 and readies i

Question

Onslow Co. purchases a used machine for $178,000 cash on January 2 and readies it for use the next day at a $2,840 cost. On January 3, it is installed on a required operating platform costing $1,160, and it is further readied for operations. The company predicts the machine will be used for six years and have a $14,000 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.

1. Record the purchase of a used machine for $178,000 cash.

2. Record the costs of $2,840 incurred on the used machine.

3. Record the cost of $1,160 for an operating platform.

Explanation / Answer

JOURNAL ENTRIES 1. Record of purcchase of used machine Machinery Account Dr. 178000 Cash Account Cr. 178000 2. Record of cost incurred on used machine Machinery Account Dr. 2840 Cash Account Cr. 2840 3. Record of $1160 for operating platform Machinery Account Dr. 1160 Cash Account Cr. 1160

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