Question

Onslow Co. purchased a used machine for $240,000 cash on January 2. On January 3, Onslow paid $8,000 to wire electricity to the machine and an additional $1,600 to secure it in place. The machine will be used for six years and have a $28,800 salvage value. Straight-line depreciation is used. On December 31, at the end of its fifth year in operations, it is disposed of.

Prepare journal entries to record the machine’s disposal under each separate situation: (a) it is sold for $24,500 cash; (b) it is sold for $98,000 cash; and (c) it is destroyed in a fire and the insurance company pays $35,000 cash to settle the loss claim.

1. Journal entry worksheet < 1 2 3 Record the sale of the used machine for $24,500 cash. Note: Enter debits before credits. Date General Journal Debit Credit Dec 31 Record entry Clear entry View general journal Journal entry worksheet < 1 2 3 Record the sale of the used machine for $98,000 cash. Note: Enter debits before credits. Date General Journal Debit Credit Dec 31 Record entry Clear entry View general journal Journal entry worksheet < 1 2 Record the insurance settlement received of $35,000 resulting from the total destruction of the machine in a fire. Note: Enter debits before credits. General Journal Debit Credit Date Dec 31 Record entry Clear entry View general journal

Answer 1

Answer:

Date	Accounts titles and Explanation	Debit ($)	Credit ($)
Dec-31	Cash	24,500
	Accumulated Depreciation	1,84,000
	Loss on Sale of Used Machine( Plug)	41,100
	Machine		2,49,600
Dec-31	Cash	98,000
	Accumulated Depreciation	1,84,000
	Profit on Sale of Used Machine(Plug)		32,400
	Machine		2,49,600
Dec-31	Cash	35,000
	Accumulated Depreciation	1,84,000
	Loss on Machine destroyed in Fire(Plug)	30,600
	Machine		2,49,600

Working……

Cost of machine = 240,000+8,000+1,600= $249,600

Depreciation (Straight-Line method) = Cost - Salvage / no of years

= (249,600-28,800)/6 yr =$36,800

Accumulated Depreciation of 5 Years ($36,800*5)=$184,000