Oaktree Company purchased new equipment and made the following expenditures:

Purchase price $ 59,000

Sales tax 3,600

Freight charges for shipment of equipment 840

Insurance on the equipment for the first year 1,040

Installation of equipment 2,400

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

Required:

Prepare the necessary journal entries to record the above expenditures

Question

Business

Shyanne Cordova

12 January, 13:11

Oaktree Company purchased new equipment and made the following expenditures:

Purchase price $ 59,000

Sales tax 3,600

Freight charges for shipment of equipment 840

Insurance on the equipment for the first year 1,040

Installation of equipment 2,400

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

Required:

Prepare the necessary journal entries to record the above expenditures

+3

Answers (1)

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Austin Jones · Answer 1

Cr. Dr.

Equipment $66,880

Account Payable $62,600

Cash $4,280

Explanation:

All the costs incurred to make asset usable should be capitalised.

Equipment Cost = Purchase Price + Sales Tax + Freight Charges + Insurance Charges + Installation

Equipment Cost = $59,000 + $3,600 + $840 + $1,040 + $2,400

Equipment Cost = $66,880