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 $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. 2. Prepare journal entries to record depreciation of the machine at December 31. View transaction list Journal entry worksheet Record the first year year-end adjusting entry for the depreciation expense of the used machine. Note: Enter debits before credits. Date General Journal Debit Credit Dec 31 1 < Prev 105 of 7 = Next >

Answer 1

Cost of machine = Cash purchase price + Cost of wiring + Installation cost

= 192,000+6,000+1,200

= $199,200

Annual depreciation = ( Cost of machine - Salvage value)/Useful life

= ( 199,200-23,040)/6

= 176,160/6

= $29,360

1. End of 1st year depreciation entry

Date	General Journal	Debit	Credit
December 31	Depreciation expense	$29,360
	Accumulated depreciation - equipment		$29,360

2. End of fifth year depreciation entry

Date	General Journal	Debit	Credit
December 31	Depreciation expense	$29,360
	Accumulated depreciation - equipment		$29,360

If the entry for disposal machinery is needed, it will be as under:

Accumulated depreciation of 5 years = Annual depreciation x 5

= 29,360 x 5

= $146,800

Book value of machinery at the end of Year 5 = Cost price - Accumulated depreciation

= 199,200-146,800

= $52,400

Loss on disposal = $52,400

Journal entry end of Year 5

Date	General Journal	Debit	Credit
December 31	Accumulated depreciation - equipment	$146,800
	Loss on disposal	$52,400
	Equipment		$199,200

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