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

Question

Orion Flour Mills purchased a new machine and made the following expenditures: Purchase price Sales tax Shipment of machine Insurance on the machine for the first year nstallation of machine $70,000 5,750 950 650 1,900 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.) Journal entry worksheet Record the expenditures for the new machine. Note: Enter debits before credits. ransaction General Journal Debit Credit

Explanation / Answer

SOLUTION

1. Journal Entry to record the expenditure for the new machine-

With the exception of the $650 annual insurance, each of the expenditures described is necessary to bring the machine to its condition and location for use. Orion will initially report the $650 insurance amount as prepaid insurance and expense over the first year of coverage.

Total cost of Equipment-

Account titles and explanation Debit ($) Credit ($) Equipment 78,600 Prepaid Insurance 650 Cash 3,500 Accounts payable ($70,000 + $5,750) 75,750 (To record purchase of equipment)

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.