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On January 1, Walker purchases a used machine for $150,000 and readies it for use the next day at a cost of $3,510. On January
On January 1, Walker purchases a used machine for $150,000 and readies it for use the next day at a cost of $3,510. On January 4, it is mounted on a required operating platform costing $4,600, and it is further readied for operations. Management estimates the machine will be used for seven years and have an $18,110 salvage value. Depreciation is to be charged on a straight-line basis. On December 31, at the end of its sixth year of use, the machine is disposed of.
Required:
- Prepare journal entries to record the machine's purchase and the costs to ready and install it. Cash is paid for all costs incurred.
- Prepare journal entries to record depreciation of the machine at December 31 of (a) its first year in operations and (b) the year of its disposal.
- Prepare journal entries to record the machine's disposal under each of the following separate assumptions: (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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