Question

Part 3 Onslow Co. purchased a used machine for $240,000 cash on January 2. On January 3, Onslow paid $6,000 to wire electricity to the machine and an additional $1,200 to secure it in place. The machine will be used for six years and have a $28,800 salvage value. Straight-line depreciation is used. On December 31, at the end of its fifth year in operations, it is disposed of.

Answer 1

Answer:

Date Journal entries                                        Debit Credit

Jan 02 Machine                                          $ 2,40,000  

                Cash                                                                    $2,40,000

(To record purchase of machine)  

Jan 03 Machine                                         $ 6,000  

               Cash                                                                     $6,000

(To record payment to make machinery

fit for working)  

Jan 03 Machine                                       $      1,200  

               Cash                                                                    $ 1,200

(To record payment for machine)  

All cost paid to make machinery ready for use will be considered as cost of machine.

Step-by-step explanation:

Calculation of cost of machinery

Purchase of machine   240,000

Wire charges                      6,000

Additional charges              1,200

Total cost                         247,200

Calculation of depreciation

Depreciation = (Cost - salvage value)/ useful years of life

=(247200-28800)/ 6

=36400

Straightline depreciation method

Opening asset value         247200

Depreciation for 6 years

(36400*6)                             (218400)

Final asset value balance    28800