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Mamont248 [21]
3 years ago
10

Onslow Co. purchased a used machine for $178,000 cash on January 2. On January 3, Onslow paid $2,840 to wire electricity to the

machine and an additional $1,160 to secure it in place. The machine will be used for six years and have a $14,000 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 $15,000 cash; (b) it is sold for $50,000 cash; and (c) it is destroyed in a fire and the insurance company pays $30,000 cash to settle the loss claim.
Business
1 answer:
IgorLugansk [536]3 years ago
4 0

Answer:

A. Loss - $27,153

B. Gain - $7,847

C. Loss - $12,153

Explanation:

Machine’s value = $(178,000+2,840+1,160)

= 182,000

Since the machine is placed on January 3, depreciation of first year will be of 363 days.

Depreciation at the end of 1st year = ((182,000-14,000)/6) × (363/365) = $27,847

Depreciation of each following Year= (182,000-14,000)/6 = $28,000

Total Depreciation at the end of fifth year= $27,847+(28,000×4) = $139,847

Therefore, Book Value of machine at the end of fifth year = $(182,000-139,847) = $42,153

REQUIREMENT - A:

Loss due to disposal of machine

= $(42,153-15,000) = $27,153

Journal entry:

Cash Dr 15,000

Loss Dr 27,153

Accumulated Depreciation Dr 139,847

Machine Cr 182,000

Loss from the sale of non-current asset is alwyas debit.

Requirement - B

Gain from the sale of machines = $(50,000-42,153) = $7,847

Journal Entry:

Cash Dr 50,000

Accumulated Depreciation Dr 139,847

Gain Cr 7,847

Machine Cr 182,000

Gain from the disposal of assets is an income, therefore it is credit. It is an other income. As the disposal occurs at a good cash value, there is a gain.

Requirement C:

Again, Book Value = $42,153,

Cash = $30,000

Loss from proceed from the sale of machine = $(42,153 - 30,000) = $12,153

Cash Dr 30,000

Loss Dr 12,153

Accumulated Depreciation Dr 139,847

Machine Cr 182,000

Loss from the sale of non-current asset is alwyas debit.

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Alex_Xolod [135]

Missing Information:

The normal capacity of  is 40,000 direct labor hours and 20,000 units per month. A finished unit requires 6 lb of materials at an estimated cost of $2 per pound. The estimated cost of labor is $10.00 per hour.

Answer:

Raw materials Inventory   260,000 debit  

D:M price variance                2,600 debit

     Account Payable                   257,400 credit

--to record the purchase ---

WIP-Inventory          248,000 debit

DM quality variance    2,000 debit

       Raw materials Inventory   250,000 debit

--to record requisition of materials--

WIP-Inventory    420,000 debit

D:L rate variance    1,640 debit

    Wages Payables             411,640 credit

    DL efficiency variance     10,000 credit

--to record the charge of labor into WIP--

Explanation:

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130,000 pounds x $2.00 (standard) = $260,000

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standard:  21,000 x 6 = 124,000 pounds x $2 = 248,000

variance: 2,000 unfavorable  

41,000 hours x $10.04 each = $411,640

41,000 hours x $10.00 each = $410,000

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