Question

Onslow Co. purchases a used machine for $178,000 cash on January 2 and readies it for use the next day at a $2,840 cost. On January 3, it is installed on a 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 December 31, at the end of its fifth year in operations, it is disposed of.
Record the first year year-end adjusting entry for the depreciation expense of the used machine.

Answer 1

Answer:

$28,000

Explanation:

First determine the cost of the Asset.

Purchase Price                        $178,000

January 2 Readiness Costs       $2,840

January 3 Operating Platform    $1,160

Total                                         $182,000

Then, Determine the Depreciation

Depreciation = (Cost - Salvage Value) / Number of Useful Life

                      = ($182,000 - $14,000) / 6

                      = $28,000

The Charge will be constant over the years.