Oaktree Company purchased new equipment and made the following expenditures: Purchase price $ 59,000 Sales tax 3,600 Freight charges for shipment of equipment 840 Insurance on the equipment for the first year 1,040 Installation of equipment 2,400 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

1 answer
Question:

Oaktree Company purchased new equipment and made the following expenditures:
Purchase price $ 59,000
Sales tax 3,600
Freight charges for shipment of equipment 840
Insurance on the equipment for the first year 1,040
Installation of equipment 2,400
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

Answers

Answer:                                   Cr.          Dr.Equipment            $66,880Account Payable                  $62,600Cash                                      $4,280Explanation:All the costs incurred to make asset usable should be capitalised.Equipment Cost = Purchase Price + Sales Tax + Freight Charges + Insurance Charges + InstallationEquipment Cost = $59,000 + $3,600 + $840 + $1,040 + $2,400Equipment Cost = $66,880

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