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. purchased a used machine for $288,000 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 $34,560 salvage value. Straight-line depreciation is used. On December 31, at the end of its fifth year in operations, it is disposed of. Problem 8-6A Part 2 2. Prepare journal entries to record depreciation of the machine at December 31. No Debit Credit Date Dec 31 General Journal Depreciation expense-Machinery Accumulated depreciation-Machinery Dec 31 Loss on sale of machinery Machinery

Answer 1

No	date	general journal	debit	credit
1	dec 31	Depreciation expense - machinery	43840
		Accumulated Depreciation - machinery		43840
2	Dec 31	Loss on Machinery disposal	78400
		Accumulated depreciation-Machinery	219200
		Machinery		297600

*any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management shall be recognized with the cost of the asset. Hence 8000$ of wiring electricity to the machine is capitalized.

*cost of site preparation is directly attributable to cost. Hence $1600 for securing machinery in its place is also capitalized.

Therefore total cost of machinary will be $297600. (288000+8000+1600)

*depreciation per year =(297600-34560)/6

=43840

*accumulated Depreciation for 5 years = 43840*5=219200

3.

No	date	general journal	debit	credit
1	dec 31	cash	24000
		Accumulated Depreciation - machinert	219200
		Loss on sale of machinery	54400
		Machinery		297600
2	Dec 31	cash	96000
		Accumulated Depreciation - machinary	219200
		Machinary		297600
		Profit on sale of machinary		17600
3	Dec31	cash	34500
		Accumulated Depreciation - machinary	219200
		Loss due to fire on machinery	43900
		Machinery		297600