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question problem 8 6a machine used purchased jan 2 for 178 000 cash and readies it f 4277196

Question

Problem 8-6A

Machine (used) purchased Jan 2 for $178,000 cash and readies it for use the next day at a $2840 cost. Jan 3 installed on required operating platform costing 1,160 and it is further readied for operations. The company predicts the machine will be used for six years and have a 14,000 salvage value. Depreciation is to be charged on a straight-line basis. On Dec 31 at the end of its fifth year in operations it is disposed of.

Questions:

1. Prepare journal entries to record the machine’s purchase and the cost’s to ready and install it. Cash is paid for all costs incurred.

2. Prepare journal entries to record depreciation of the machine at Dec 31 of a) its first year in operations and b) the year of its disposal.

3. Prepare journal entries to record the machine’s disposal under each of the following separate assumptions: a) it is sold for 15,000 cash b) it is sold for 50,000 cash c) it is destroyed in a fire and the insurance company pays 30,000 cash to settle the loss claim.

Debit          Credit

Jan.   2

Jan.   3

Jan.   3

a. First year

Dec. 31

b. Fifth year

Dec. 31

Accumulated depreciation at the date of disposal

            Book value at the date of disposal

            a. Sold for $15,000 cash                                                                     Debit           Credit

Dec. 31

          b. Sold for $50,000 cash

Dec. 31

c. Destroyed in fire and collected $30,000 cash from insurance co.

Dec. 31

Jan.   2

 

 

 

 

 

 

 

 

 

 

 

Jan.   3

 

 

 

 

 

 

 

 

 

 

 

Jan.   3

 

 

 

 

 

 

 

 

 

 

 

 

 

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