Orion Flour Mills purchased a new machine and made the following expenditures: P
ID: 2546114 • Letter: O
Question
Orion Flour Mills purchased a new machine and made the following expenditures:
Purchase price
$61,000
Sales tax
5,300
Shipment of machine
860
Insurance on the machine for the first year
560
Installation of machine
1,720
The machine, including sales tax, was purchased on account, with payment due in 30 days. The other expenditures listed above were paid in cash.
Record the above expenditures for new machine.
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Abbott Landscaping purchased a tractor at a cost of $39,000 and sold it three years later for $19,800. Abbott recorded depreciation using the straight-line method, a five-year service life, and a $2,500 residual value. Tractors are included in the Equipment account.
1.Record the sale.
2. Assume the tractor was sold for $12,400 instead of $19,800. Record the sale
Purchase price
$61,000
Sales tax
5,300
Shipment of machine
860
Insurance on the machine for the first year
560
Installation of machine
1,720
Explanation / Answer
1) Purchase price 61,000 Sales tax 5,300 Shipping 860 Installation 1,720 total cost 68,880 Journal Entry Account titles & Explanations Debit Credit Equipment 68,880 prepaid insurance 560 Cash 3,140 Accounts payable )61300+5300) 66,300 2) Depreciation expense =(39000-2500)/5 7300 Journal Entry Account titles & Explanations Debit Credit Cash 19,800 Accumulated depreciation(7300*3) 21900 Gain on disposal 2,700 Equipment 39,000 Cash 12,400 Accumulated depreciation(7300*3) 21900 loss on disposal 4,700 Equipment 39,000
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