Part 3 Onslow Co. purchased a used machine for $240,000 cash on January 2. On January 3, Onslow paid $6,000 to wire electricity to the machine and an additional $1,200 to secure it in place. The machine will be used for six years and have a $28,800 salvage value. Straight-line depreciation is used. On December 31, at the end of its fifth year in operations, it is disposed of.

Date Journal entries Debit Credit

Jan 02 Machine $ 2,40,000

Cash $2,40,000

(To record purchase of machine)

Jan 03 Machine $ 6,000

Cash $6,000

(To record payment to make machinery

fit for working)

Jan 03 Machine $ 1,200

Cash $ 1,200

(To record payment for machine)

All cost paid to make machinery ready for use will be considered as cost of machine.

Step-by-step explanation:

Calculation of cost of machinery

Purchase of machine 240,000

Wire charges 6,000

Additional charges 1,200

Total cost 247,200

Calculation of depreciation

Depreciation = (Cost - salvage value) / useful years of life

= (247200-28800) / 6

=36400

Straightline depreciation method

Opening asset value 247200

Depreciation for 6 years

(36400*6) (218400)

Final asset value balance 28800