Question

Required information Problem 10-6A Disposal of plant assets LO C1, P1, P2 [The following information applies to the questions displayed below.) Onslow Co. purchases a used machine for $288,000 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 $34,560 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. Problem 10-6A Part 1 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.

Answer 1

Credit Requirement 1 Date General Journal Jan-02 Machinery Cash Debit $ 288,000.00 $ 288,000.00 (To Record purchase of machinery) $ 10,000.00 Jan-03 Machinery Cash $ 10,000.00 (To Record the cost incurred for ready to use) $ 2,000.00 Jan-03 Machinery Cash $ 2,000.00 (To Record the cost incurred for ready to use)

Credit Requirement 2 Date General Journal Dec-31 Depreciation expense - Machinery Accumulated depreciation - Machinery Debit $ 44,240.00 $44,240.00 (To Record adjusting entry for depreciation) 44,240.00 Dec-31 Depreciation expense - Machinery Accumulated depreciation - Machinery $44,240.00 (To Record depreciation in year of disposal) Note : Depreciation expense - Machinery (300000-34560)/6 $44,240.00

Credit Requirement 3 Date General Journal Dec-31 Cash Loss on sale of machinery Accumulated depreciation - Machinery Machinery Debit $ 22,500.00 $ 56,300.00 $221,200.00 $ 300,000.00 (To Record sale of machinery) $ 90,000.00 $221,200.00 Dec-31 Cash Accumulated depreciation - Machinery Machinery Gain on sale of machinery $ 300,000.00 $ 11,200.00 (To Record sale of machinery) Dec-31 Cash Accumulated depreciation - Machinery Loss from fire Machinery $ 33,000.00 $ 221,200.00 $ 45,800.00 $ 300,000.00 (To Record insurance settlement)