Question

Required information 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 $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 $23.040 Salvage value. Straight-line depreciation is used. On December 31, at the end of its fifth year in operations. disposed of 3. Prepare journal entries to record the machine's disposal under each separate situation: (a) it is sold for $20.000 cash: (it is sold for $80,000 cash; and (it is destroyed in a fire and the insurance company pays $30,500 cash to settle the loss claim. View transaction list Journal entry worksheet Record the sale of the used machine for $20,000 cash. Note: Enter debits before credits Date General Journal Debit Credit Dec 31 View general journal Record entry Clear entry

Answer 1

Depreciation each year under the straight line method = (Cost + Additional expenses - Salvage value) / Estimated useful life

= ($192,000 + $8,000 + $1,600 - $23,040) / 6

= $29,760

Accumulated depreciation at the end of fifth year = $29,760 * 5 = $148,800

(a)

Date	General Journal	Debit	Credit
Dec. 31	Cash	$20,000
	Accumulated depreciation	$148,800
	Loss on sale	$32,800
	Machine		$201,600 ($192,000+$8,000+$1,600)

(b)

Date	General Journal	Debit	Credit
Dec. 31	Cash	$80,000
	Accumulated depreciation	$148,800
	Gain on sale		$27,200
	Machine		$201,600 ($192,000+$8,000+$1,600)

(c)

Date	General Journal	Debit	Credit
Dec. 31	Cash	$30,500
	Accumulated depreciation	$148,800
	Loss on settlement	$22,300
	Machine		$201,600 ($192,000+$8,000+$1,600)