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29 December, 18:40

Orion Flour Mills purchased a new machine and made the following expenditures:

Purchase price $55,000

Sales tax 5,000

Shipment of machine 800

Insurance on the machine for the first year 500

Installation of machine 1,600

The machine, including sales tax, was purchased on account, with payment due in 30 days. The other expenditures listed above were paid in cash.

Required:Record the above expenditures for the new machine.

Transaction General Journal Debit Credit

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  1. 29 December, 18:57
    0
    Orion Flour Mills Journal entry

    Dr Equipment 62,400

    Dr Prepaid Insurance 500

    Cr Cash 2,900

    Cr Accounts Payable 60,000

    Explanation:

    Calculation for cost of equipment

    Purchase price 55,000

    Add: Sales tax 5,000

    Add: Shipment of machine 800

    Add: Installation 1,600

    Total Cost of Equipment 62,400

    Calculation for Cash

    Shipment of machine 800

    Add Insurance on the machine for the first year 500

    Add Installation 1,600

    Total Cash 2,900

    Calculation for Accounts Payable

    Purchase price 55,000

    Add: Sales tax 5,000

    Total Account payable 60,000
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