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. purchased a used machine for $178,000 cash on January 2. On January 3, Onslow paid $2,840 to wire electricity to the machine and an additional $1,160 to secure it in place. The machine will be used for six years and have a $14,000 salvage value. Straight-line depreciation is used. On December 31, at the end of its fifth year in operations, it is disposed of. Problem 10-6A Part 2 2. Prepare journal entries to record depreciation of the machine at December 31.

Answer 1

Cost Price Add Installation Charges (2840 + 1160) Total Cost Price of the Machine Less Salvage Value Depreciable Value Number of Years of Life Depreciation expense Per Year (168000 /6) 178,000 4,000 182,000 (14,000) 168,000 28,000 Year Depreciation Expense Accumulated Depreciation Beginning Value (A) (B) ou AwN 182.000 154,000 126,000 98,000 70,000 42,000 28,000 28,000 28,000 28,000 28,000 28,000 28,000 56,000 84,000 112,000 140,000 168,000 Book Value (A-B) 154,000 126,000 98,000 70,000 42,000 14,000 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. Debit Credit 178,000 30 31 32 33 Date Account title & explanation 2-Jan Machinery Cash (To record purchase of machinery) 178,000

Credit 39 2.) Prepare journal entries to record depreciation of the machine at December 31. 40 41 Date Account title & explanation Debit 31-Dec Depreciation Expense - Machinery 28,000 43 Accumulated Depreciation - Machinery (To record depreciation expense) 28,000 44 Debit Credit 46 (b) The year of its disposal. 47 48 Date Account title & explanation 49 31-Dec Depreciation Expense - Machinery Accumulated Depreciation - Machinery (To record depreciation expense) 28,000 28,000 3.) Prepare journal entries to record the machine's disposal under each of the following separate assumptions: 54 55 Depreciation expense for 5 years (28000*5) 140,000 Debit Credit Date Account Title & Explanation 31-Dec Cash Accumulated Dpreciation Machinery Loss on sale of Machinery (182000 - 140000 - 15000) Machinery (To record sale of Machinery) 15,000 140,000 27,000 182,000

Debit Credit 64 2. record the sale of used machine for 50,000 65 66 Date Account Title & Explanation 67 31-Dec Cash Accumulated Dpreciation Machinery Gain on sale of Machinery (- 182000 + 50000 +140000) 70 Machinery 71 (To record sale of Mahinery) 50,000 140,000 8,000 182,000 72 76 73 3. Record the insurance settlement received of 30,000 resulting from the total destruction of the machine in a fire. 74 75 Date Account Title & Explanation Debit Credit 31-Dec Cash 30,000 Accumulated Dpreciation-Machinery 140,000 78 Loss from Fire (182000 - 140000 - 30000) 12,000 Machinery 182,000 (To record insurance settlement)