On January 1, Walker purchased a used machine for $150,000. On January 4, Walker paid $3,510 to wire electricity to the machine and an additional $4,600 to secure it in place. The machine will be used for seven years and have an $18,110 salvage value. Straight-line depreciation is used. On December 31, at the end of its sixth year of use, the machine is disposed of. Required 1. Prepare journal entries to record the machine’s purchase and the costs to ready it for use. Cash is paid for all costs incurred. 2. Prepare journal entries to record depreciation of the machine at December 31 of (a) its first year of operations and (b) the year of its disposal. 3. Prepare journal entries to record the machine’s disposal under each separate situation: (a) it is sold for $28,000 cash; (b) it is sold for $52,000 cash; and (c) it is destroyed in a fire and the insurance company pays $25,000 cash to settle the loss claim.
On January 1, Walker purchased a used machine for $150,000. On January 4, Walker paid $3,510 to wire
electricity to the machine and an additional $4,600 to secure it in place. The machine will be used for
seven years and have an $18,110 salvage value. Straight-line
end of its sixth year of use, the machine is disposed of.
Required
1. Prepare
for all costs incurred.
2. Prepare journal entries to record depreciation of the machine at December 31 of (a) its first year of
operations and (b) the year of its disposal.
3. Prepare journal entries to record the machine’s disposal under each separate situation: (a) it is sold for
$28,000 cash; (b) it is sold for $52,000 cash; and (c) it is destroyed in a fire and the insurance company
pays $25,000 cash to settle the loss claim.
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