Onslow Company purchased a used machine for $288,000 cash on January 2. On January 3, Onslow paid $10,000 to wire electricity to the machine. Onslow paid an additional $2,000 on January 4 to secure the machine for operation. 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. 3. Prepare journal entries to record the machine's disposal under each separate situation: (a) it is sold for $24,500 cash and (b) it is sold for $98,000 cash.
Onslow Company purchased a used machine for $288,000 cash on January 2. On January 3, Onslow paid $10,000 to wire electricity to the machine. Onslow paid an additional $2,000 on January 4 to secure the machine for operation. 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. 3. Prepare journal entries to record the machine's disposal under each separate situation: (a) it is sold for $24,500 cash and (b) it is sold for $98,000 cash.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:Onslow Company purchased a used machine for $288,000 cash on January 2. On January 3, Onslow paid $10,000 to
wire electricity to the machine. Onslow paid an additional $2,000 on January 4 to secure the machine for operation. 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.
3. Prepare journal entries to record the machine's disposal under each separate situation: (a) it is sold for $24,500 cash and (b) it is
sold for $98,000 cash.
View transaction list
Journal entry worksheet
1 2
<
Record the sale of the used machine for $98,000 cash.
Note: Enter debits before credits.
Date
December 31 Cash
General Journal
Gain on sale of machinery
Debit
98,000
Credit
98,000
Transcribed Image Text:Onslow Company purchased a used machine for $288,000 cash on January 2. On January 3, Onslow paid $10,000 to
wire electricity to the machine. Onslow paid an additional $2,000 on January 4 to secure the machine for operation. 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.
3. Prepare journal entries to record the machine's disposal under each separate situation: (a) it is sold for $24,500 cash and (b) it is
sold for $98,000 cash.
View transaction list
Journal entry worksheet
1 2
Record the sale of the used machine for $24,500 cash.
Note: Enter debits before credits.
Date
December 31 Cash
General Journal
Loss on sale of machinery
Debit
24,500
Credit
24,500
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