Question

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 $192,000 cash on January 2 On January 3, Onslow paid $6,000 to wire electricity to the machine and an additional $1.200 to secure it in place. The machine will be used for six years and have a $23.040 salvage value Straight line depreciation is used. On December 31, at the end of its fifth year in operations. It is disposed of Problem 8-6A Part 3 is sold for 3. Prepare journal entries to record the machine's disposal under each separate tuanon s sold for $24.500 cash; 598.000 cash and it is destroyed in a fire and the insurance company pays $35.000 cash to see the loss claim Journal entry worksheet Record the sale of the used machine for $34.500 cash ype here to search

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. Step 1 Calculation of Cost of Machinery Purchase price of Machinery Add: Additional cost Add: Operating Platform Total Cost of Machine $1,92,000 $6,000 $1,200 $1,99,200 Step 2 Straight Line Depreciation = (Cost - Salvage)/Useful life Particulars Machinery Cost $1,99,200 Salvage Value $23,040 Useful Life Depreciation $29,360 [($199200-$23040)/6] Step 3 Depreciation Schedule Year Depreciation Opening Book Value $1,99,200 $1,69,840 $1,40,480 $1,11,120 $81,760 Accumulated Depreciation $29,360 $58,720 $88,080 $1,17,440 $1,46,800 $29,360 $29,360 $29,360 $29,360 $29,360 Closing Book Value $1,69,840 $1,40,480 $1,11,120 $81,760 $52,400 uw

Journal Entry Date December 31 Debit Credit $1,46,800 $24,500 $27,900 $1,99,200 December 31 General Journal Case1 Accumulated Depreciation - machinery Cash Loss on sale of Machinery Machinery (To record sale of machinery) Case2 Accumulated Depreciation - machinery Cash Gain on sale of Machinery Machinery (To record sale of machinery) Case3 Accumulated Depreciation - machinery Cash Loss by fire Machinery (To record loss on destructon of machiney by fire) $1,46,800 $98,000 $45,600 $1,99,200 December 31 $1,46,800 $35,000 $17,400 $1,99,200