Question

Orion Flour Mills purchased a new machine and made the following expenditures:

Purchase price $ 59,000
Sales tax 5,200
Shipment of machine 840
Insurance on the machine for the first year 540
Installation of machine 1,680
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 transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Orion Flour Mills

Debit Milling Machine $64,200

Credit Accounts Payable $64,200

To record the purchase of a new machine on account, terms n/30.

Debit Freight-in $840

Debit Insurance $540

Debit Machine Installation $1,680

Credit Cash Account $3,060

To record additional expenditure on the purchase.

Debit Milling Machine $2,520

Credit Freight-in $840

Credit Machine Installation $1,680

To record the cost of additional expenditure to the Milling Machine.

Step-by-step explanation:

Using the journal to account for the acquisition of a new machine by Orion Flour Mills initially records the transactions after identifying the accounts involved, and the accounts to be debited and credited respectively.

The cost of the new machine includes the additional expenditure incurred for bringing it into use. The expenditure will include the shipment, sales tax, and installation costs. Insurance will be excluded as it is not incurred in order to bring the machine into use.