Question

Orion Flour Mills purchased a new machine and made the following expenditures: Purchase price $ 63,000 Sales tax 5,400 Shipment of machine 880 Insurance on the machine for the first year 580 Installation of machine 1,760 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. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Answer:

Explanation:

Before recording the journal entry, first we have to determine the total cost which is shown below:

= Purchase price + sales tax + Shipment of machine + Installation of machine

= $63,000 + $5,400 + $880 + $1,760

= $7,1040

Now the journal entry would be

Equipment A/c Dr $7,1040

Prepaid insurance A/c Dr $580

            To Cash A/c                $3,220             ($880 + $1,760 + $580)

            To Accounts payable $68,400            ($63,000 + $5,400)

(Being the expenditure and equipment value is recorded)