A Disposal of plant assets LO C1, P1, P2 [The following information applies to the questions displayed below.] Onslow Co. purchases a used machine for $178,000 cash on January 2 and readies it for use the next day at a $2,840 cost. On January 3, it is installed on a required operating platform costing $1,160, and it 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 on a straight-line basis. On December 31, at the end of its fifth year in operations, it is disposed of

= $ 41,940

Explanation:

Purchased machine for $178,000 cash on January 2

And readies it for use the next day at a $2,840 cost

On January 3, it is installed costing $1,160

Total Acquisition Cost =        $ 181,640        

Salvage value   $14,000

Useful Life = 6 years

Depreciation Straight Line Method= Cost - Salvage Value/ Useful Life

Depreciation Straight Line Method= $ 181,640 -$14,000/6

                                                         = $ 167,640/6= $ 27,940

After 5 years its Value would be = $ 181,640 -$ 27,940*5

                                                          =      $ 181,640   - 139,700

                                                        = $ 41,940

It must be disposed off to get a value at least equal to $ 41,940 which is its value .

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