Asked on 12 Jan

Onslow Co. purchases a used machine for $178000 cash on January 2 and readies it for use the next day at a cost of $2840. On January 3, it is installed on a required operating platform costing $1160, and it is further readied for operations. The company predicts the machine will be used for six years and have a $14000 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.

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

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

3. Prepare journal entries to record the disposal of the machine under each of the following separate assumptions, (a) it is sold for $15000 cash (b) it is sold for $50000 cash (c) it is destroyed in a fire and the insurance company pays $30000 to settle the loss of the claim. 

Answered on 12 Jan

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