Question

Orion Flour Mills purchased a new machine and made the following expenditures: Purchase price $60,000 Sales tax 5,250 Shipment of machine 850 Insurance on the machine for the first year 550 Installation of machine 1,700The 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.

Answer 1

Debit Equipment 67,800

Debit Prepaid Insurance 550

Credit Cash 3,100

Credit Accounts Payable 65,250

Step-by-step explanation:

Orion Flour Mills Record of expenditure for the new machine.

Purchase price$60,000

Sales tax 5,250

Shipping 850

Installation 1,700

Total cost$ 67,800

Theb annual insurance of 550 was not included.

Therefore each of the expenditures which is been listed above are important to help bring the machine to its conditions as well as the location for use.

Since Orion will initially report the $550 of the insurance amount as the prepaid insurance and expense over the first year of coverage will have to:

Debit Equipment 67,800

Debit Prepaid Insurance 550

Credit Cash 3,100

Credit Accounts Payable 65,250

( To record Purchase of equipment)

Calculation for Cash

Shipment of machine 850

Insurance on the machine for the first year 550

Installation of machine 1,700

Total =3,100