Question: Onslow Co. purchases a used machine for $144,000 cash on January 2 and readies it for use the next day at a cost of $6,000. On January 3, it is installed on a required operating platform costing $1,200, 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.
1.Prepare journal entries to record the machine's purchase and the costs to ready and install it. Cash is paid for all costs incurred.
Entry #1. Record the purchase of a used machine for $144,000 cash.
Entry #2. Record the costs of $6,000 cash incurred on the used machine.
Entry #3: Record the cost of $1,200 for an operating platform.
2. Prepare journal entries to record depreciation of the machine at December 31.
Entry #1Its first year in operations : Record the year-end adjusting entry for the depreciation expense of the used machine.
Entry#2 The year of its disposal : Record the year-end adjusting entry for the depreciation expense of the used machine.
3. Prepare journal entries to record the machine's disposal under each of the following separate assumptions:
Entry #1: Record the sale of the used machine for $23,000 cash.
Entry #2: Record the sale of the used machine for $92,000 cash.
Entry #3: Record the destruction of the used machine in a fire with $33,500 cash insurance settlement.