Answer:
Onslow Co.
Journal Entries:
1. Jan. 2: Debit Equipment $178,000
Credit Cash $178,000
To record the cash payment for equipment purchase.
2. Jan. 3: Debit Equipment $4,000
Credit Cash $4,000
To record the cash payment for readying the equipment for use.
3. Dec. 31: Debit Depreciation Expense $28,000
Credit Accumulated Depreciation $28,000
To record depreciation expense for the first year.
4. Dec. 31, Year 5: Debit Equipment Disposal$178,000
Credit Equipment $178,000
To transfer the equipment account to the Equipment Disposal account.
Debit Accumulated Depreciation $140,000
Credit Equipment Disposal $140,000
To transfer accumulated depreciation to the Equipment Disposal account.
a) Debit Cash $15,000
Credit Equipment Disposal $15,000
To record the cash proceeds from sale of equipment.
Debit Loss on Sale of Equipment $23,000
Credit Equipment Disposal $23,000
To record the loss on Equipment Disposal.
b) Debit Cash $50,000
Credit Equipment Disposal $50,000
To record the cash proceeds from sale of equipment.
Debit Sale of Equipment $12,000
Credit Gain on Sale of Equipment $12,000
To record the gain on Equipment Disposal.
c) Debit Cash $30,000
Credit Equipment Disposal $30,000
To record the cash proceeds from insurance company.
Debit Loss on Disposal $8,000
Credit Equipment Disposal $8,000
To record the loss on Equipment Disposal.
Explanation:
a) Data and Calculations:
January 2: Cost of used machine = $178,000
January 3: Readying costs = $4,000 ($2,840 + $1,160)
Estimated useful life = 6 years
Estimated salvage value = $14,000
Depreciable amount = $168,000 ($182,000 - $14,000)
Depreciation method = straight-line method
Annual depreciation expense = $28,000 ($168,000/6)
Accumulated depreciation at December 31, Year 5 = $140,000 ($28,000*5)
Disposal date = December 31, Year 5
Journal Entries Analysis:
1. Jan. 2: Equipment $178,000 Cash $178,000
2. Jan. 3: Equipment $4,000 Cash $4,000
3. Dec. 31: Depreciation Expense $28,000 Accumulated Depreciation $28,000
4. Dec. 31, Year 5: Equipment Disposal $178,000 Equipment $178,000
Accumulated Depreciation $140,000 Equipment Disposal $140,000
a) Cash $15,000 Equipment Disposal $15,000
Loss on Sale of Equipment $23,000 Equipment Disposal $23,000
b) Cash $50,000 Equipment Disposal $50,000
Equipment Disposal $12,000 Gain on Sale of Equipment $12,000
c) Cash $30,000 Equipment Disposal $30,000
Loss on Disposal $8,000 Equipment Disposal $8,000
