Problem 10-6A Disposal of plant assets LO C1, P1, P2

[The following information applies to the questions displayed below.]

Onslow Co. purchases a used machine for $240,000 cash on January 2 and readies it for use the next day at a $10,000 cost. On January 3, it is installed on a required operating platform costing $2,000, and it is further readied for operations. The company predicts the machine will be used for six years and have a $28,800 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.

Part 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.

Part 2. Prepare journal entries to record depreciation of the machine at December 31.

Part 3. Prepare journal entries to record the machine's disposal under each of the following separate assumptions: 1. Record the sale of the used machine for $21,500 cash.

2. Record the sale of the used machine for $86,000 cash.

3. Record the insurance settlement received of $32,000 resulting from the total destruction of the machine in a fire.