Question

Onslow Co. purchased a used machine for $192,000 cash on January 2. On January 3, Onslow paid $8,000 to wire electricity to the machine and an additional $1,600 to secure it in place. The machine will be used for six years and have a $23,040 salvage value. Straight-line depreciation is used. On December 31, at the end of its fifth year in operations, it is disposed of.Prepare journal entries to record the machine's purchase and the costs to ready and install it.

Answer 1

The journal entries for Onslow Co.'s purchase and installation of a used machine would include a debit to Equipment for $192,000 and a debit to Equipment for the installation costs of $9,600, both offset by credits to Cash. Straight-line depreciation would be used to depreciate the asset over its expected useful life.

Step-by-step explanation:

The student is asking for the preparation of journal entries to record the purchase of a machine and the costs associated with readying and installing it. The costs involved are $192,000 for the purchase of the machine, $8,000 for wiring electricity to the machine, and an additional $1,600 to secure it in place.

The journal entries would be as follows:

For the purchase of the machine on January 2:
Debit Equipment $192,000
Credit Cash $192,000

For the costs on January 3:
Debit Equipment $9,600 (sum of $8,000 and $1,600)
Credit Cash $9,600

This results in a total recorded asset cost of $201,600 ($192,000 + $9,600). Straight-line depreciation will be used, so the annual depreciation would be calculated based on the machine's total cost, expected salvage value after six years of use, and the useful life of the asset.