Onslow Co. purchases a used machine for $240,000 cash on January 2 and readies it for use the next day at an $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 $28,800 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. Required:
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 (Jan 2) Record the purchase of a used machine for $240,000 cash.
Entry #2 (Jan 3) Record the costs of 8,000 cash incurred on the used machine
Entry #3 (Jan 3) Record the cost of $1,600 for an operating platform.
2. Prepare journal entries to record depreciation of the machine at December, 31.
(a) its first year in operations.
Entry #1 (dec 31) Record the year-end adjusting entry for the depreciation expense of the used machine.
(b) The year of its disposal.
Entry #1 (dec 31) 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:
(a) It is sold for $20,000 cash.
Entry #1 (Dec 31) Record the sale of the used machine for $20,000 cash.
(b) It is sold for $80,000 cash
Entry #1 (dec 31) Record the sale of the used machine for $80,000 cash.
(c) it is destroyed in a fire and the insurance company pays $30,500 cash to settle the loss claim.
Entry #1 (dec 31) Record the destruction of the used machine in a fire with $30,500 cash insurance settlement.