Question

Required information Problem 8-6A Disposal of plant assets LO C1, P1, P2 The following information applies to the questions displayed below.) Onslow Co. purchased a used machine for $288,000 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 $34,560 salvage value. Straight-line depreciation is used. On December 31, at the end of its fifth year in operations, it is disposed of. oblem 8-6A Part 2 Prepare journal entries to record depreciation of the machine at December 31 View transaction list Journal entry worksheet Record the first year year-end adjusting entry for the depreciation expense of the used machine.

Answer 1

Cost of the fixed assets consists of the following:
i) its purchase price, import duty and non refundable taxes. Any trade discount and rebate should be excluded
ii) cost directly attributable for bringing the assets their present location and condition which is necessary for the operation of the assets
Some examples of the directly attributable costs are delivery and handling cost, installation and assembly cost, site preparation cost, testing cost incurred ensure assets is properly functioning or not.

Cost of Machine Add: Wire Electricity cost Add: Installation Total cost of Machine $288,000 $8,000 $1,600 $297,600 | Straight Line Depreciation = (Cost - Salvage Value)/Useful life Straight Line Depreciation = ($297600 - $34560)/6 Straight Line Depreciation = $43840 Depreciation Schedule Opening Year WDV Depreciation Accumualted Depreciation Closing WDV $297,600 $253,760 $209,920 $166,080 $ 122,240 $43,840 $43,840 $43,840 $43,840 $43,840 $43,840 $87,680 $131,520 $175,360 $219,200 $297,600 $253,760 $209,920 $166,080 $122,240 $78,400 Credit Date Dec 31 Debit $43,840 $43,840 Account Title Depreciation Expense Accumulated Depreciation - Machinery (To record depreciation expense in first year) Accumulated Depreciation - Machinery Loss on Disposal of machinery Machinery (To record loss on disposal of machinery) Dec 31 $219,200 $78,400 $297,600