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. purchases a used machine for $192,000 cash on January 2 and readies it for use the next day at a $8,000 cost. On January 3, it is installed on a required operating platform costing $1,600, and it is further readied for operations. The company predicts the machine will be used for six years and have a $23,040 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.

Answer 1

	Purchase Price	$1,92,000
	Add:Additional cost for usage	$8,000
	Add:Installation of operating platform	$1,600
	Cost of New vehicle	$2,01,600
	Depreciable cost of asset =$201,600 - $23,040 =$178,560
	Annual Depreciation on machine =$178,560 / 6 years =$29,760
	Accumulated Depreciation at end of 5 years =$29,760*5 years =$148,800
Date	Account and explanation	Debit	Credit
Dec-31	Cash	$24,500
	Accumulated Depreciation-Machinery	$1,48,800
	Loss on disposal of machinery	$28,300
	Machinery		$2,01,600
Dec-31	Cash	$98,000
	Accumulated Depreciation-Machinery	$1,48,800
	Gain on disposal of machinery		$45,200
	Machinery		$2,01,600
Dec-31	Cash	$35,000
	Accumulated Depreciation-Machinery	$1,48,800
	Loss from fire	$17,800
	Machinery		$2,01,600