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Oaktree Company purchased new equipment and made the following expenditures:
Oaktree Company purchased new equipment and made the following expenditures:Purchase price $ 64,000
Sales tax 4,100
Freight charges for shipment of equipment 890
Insurance on the equipment for the first year 1,090
Installation of equipment 2,900
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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1) Record the purchase of equipment
2) Record any expenditures not capitalized in the purchase of equipment
Answer:The Journal entries are as follows:(1)Equipment A/c Dr. $71,890To cash $3,790To accounts payable $68,100(To record the purchase of equipment)Workings:Equipment value:= Purchase price + Sales tax + Freight charges for shipment of equipment + Installation of equipment= 64,000 +4,100 + 890 + 2,900= $71,890Cash Paid:= Freight charges for shipment of equipment + Installation of equipment= 890 + 2,900= $3,790Accounts payable = Purchase price + Sales tax= 64,000 +4,100= $68,100(2)Prepaid Insurance A/c Dr. $1,090To cash A/c $1,090(To record any expenditures not capitalized in the purchase of equipment)...