Question

Onslow Co. purchases a used machine for $144,000 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 $17,280 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.

Record the year of disposal year-end adjusting entry for the depreciation expense of the used machine.

Answer 1

Solution:

Total capitalized value of machine = $144,000 + $8,000 $1,600 = $153,600

Expected Salvage value = $17,280

Depreciable cost of machine = Cost - Salvage value = $153,600 - $17,280 = $136,320

Useful life = 6 years

Annual depreciation using straight line method = $136,320 / 6 = $22,720

Adjusting Journal Entry - Onslow Co
Date	Particulars	Debit	Credit
Year 5, Dec 31	Depreciation expense Dr	$22,720.00
	To Accumulated depreciation - Equipment		$22,720.00
	(To record adjusting entry for depreciation)