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lapeer flour mills purchased new equipment and made the following expenditures: purchase price $ 64,000 sales tax 5,450 shipment of equipment 890 insurance on the equipment for the first year 590 installation of equipment 1,780

Respuesta :

The journal entry for the following transaction will be:

Equipment A/c....Dr. 73120

Prepaid Insurance A/c....Dr. 590

Cash A/c....Cr. 3260

Accounts payable A/c....Cr.  70450

Any cost that has been incurred by the company to make an asset ready to use, is also included in its purchasing price. So, any transportation, legal, or maintenance fee is also included in the asset cost.

The total cost of the new machine = Purchase price + Sales tax + Shipment of machine + Installation of machine

Total cost of new machine = 65,000 + 5,450 + 890 + 1,780

The total cost of the new machine = $73,120

Journal entry for the same:

Equipment A/c....Dr. 73120

Prepaid Insurance A/c....Dr. 590

Cash A/c....Cr. 3260

Accounts payable A/c....Cr.  70450

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