Question

Oaktree Company purchased new equipment and made the following expenditures:

Purchase price $53,000
Sales tax 3,000
Freight charges for shipment of equipment 780
Insurance on the equipment for the first year 980
Installation of equipment 1,800

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.

Answer 1

Journal entry is shown below:

Step-by-step explanation:

According to the scenario, computation of the given data are as follows,

Total equipment cost = $53,000 + $3,000 + $780 + $1,800 = $58,580

Expenses to be paid in cash = $780 + $1,800 = $2,580

Amount to be paid = $53,000 + $3,000 = $56,000

Insurance for first year = $980

So, journal entries for the given data are as follows,

Equipments A/c Dr. $58,580

To, Cash A/c $2,580

To Amount payable A/c . $56,000

(Being purchase of equipment is recorded)

Equipment Insurance A/c Dr. $980

To, Cash A/c $980

(Being insurance of equipment for first year is recorded)