Question

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 Disposal of plant assets C1 P1 P2 Required 1. Prepare journal entries to record the machine's purchase and the costs to ready it for use. Cash is paid for all costs incurred. 2. Prepare journal entries to record depreciation of the machine at December 31 of (a) its first year of operations and (b) the year of its disposal. 3. Prepare journal entries to record the machine's disposal under each separate situation: (a) it is sold for $15,000 cash; (b) it is sold for $50,000 cash; and (c) it is destroyed in a fire and the insurance company pays $30,000 cash to settle the loss claim. Check (26) Depr. Exp., $28,000 (3) Dr Loss from Fire, $12,000

I want to make sure I did 1, 2, and 3 correctly. Thanks!

Answer 1

1	Date	Account Titles and Explanation	Debit	Credit
	Jan 2	Machinery	$178,000
		Cash		$178,000
		(To record machinery purchased)
	Jan 3	Machinery	$2,840
		Cash		$2,840
		(To record expenses paid for machinery wire electricity)
	Jan 3	Machinery	$1,160
		Cash		$1,160
		(To record installation charges paid)
2
	Dec 31	Depreciation expense - Machinery	$28,000
		Accumulated depreciation - Machinery		$28,000
		($182,000 - $14,000)/6 years
	Dec 31	Depreciation expense - Machinery	$28,000
		Accumulated depreciation - Machinery		$28,000
3	Dec 31	Cash	$15,000
		Accumulated depreciation - Machinery	$140,000
		Loss on sale of machinery	$27,000
		Machinery		$182,000
	Dec 31	Cash	$50,000
		Accumulated depreciation - Machinery	$140,000
		Machinery		$182,000
		Gain on sale of machinery		$8,000
	Dec 31	Cash	$30,000
		Accumulated depreciation - Machinery	$140,000
		Loss from fire	$12,000
		Machinery		$182,000