Prepare journal entries to record the machine's disposal under each separate situation: (a) it is sold for $20,500 cash and (b) it is sold for $82,000 cash.
Prepare journal entries to record the machine's disposal under each separate situation: (a) it is sold for $20,500 cash and (b) it is sold for $82,000 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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Question
Onslow Company purchased a used machine for $192,000 cash on January 2. On
January 3, Onslow paid $8,000 to wire electricity to the machine. Onslow paid an
additional $1,600 on January 4 to secure the machine for operation. The machine will
be used for six years and have a $23,040 salvage value. Straight-line depreciation is
used. On December 31, at the end of its fifth year in operations, it is disposed of.
Prepare journal entries to record the machine's disposal under each separate situation: (a) it is sold
for $20,500 cash and (b) it is sold for $82,000 cash.
Transcribed Image Text:Journal entry worksheet
<
1
Record the sale of the used machine for $82,000 cash.
2
Note: Enter debits before credits.
Date
December 31
Record entry
General Journal
Cash
Accumulated depreciation-Machinery
Gain on sale of machinery
Machinery
Clear entry
Debit
Credit
View general jour
Transcribed Image Text:Record the sale of the used machine for $20,500 cash.
Note: Enter debits before credits.
Date
December 31
Record entry
Cash
General Journal
Accumulated depreciation-Machinery
Loss on sale of machinery
Machinery
Clear entry
Debit
20,500
Credit
View general jo
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