Question

a company purchases a used machine for $178,000 cash on January 2nd and readies it for use the next day at $2,840 cost. On January 3rd, it is installed on a required operating platform costing $1,160, and is further readied for operations. The company predicts the machine will be used for six years and have a $14,000 salvage value. Depreciation is to be charged ona straight-line basis. On Dec.31, at the end of its fifth year in operations, it is disposed of.

Prepare journal entries to:

a. record the machine's purchase, cost to ready and installation. cash is paid for all costs.

b. record depreciation of the machine Dec. 31 of its first year in operations and also its fifth year in operations.

c. record the machine's disposal if it is destroyed in a fire and the insurance company pays $30,000 cash to settle the loss claim.