Today i will help you to solve this kind of question ”orion flour mills purchased a new machine and made the following expenditures:”. Let’s follow each step carefully to know how to do and understand the way to solve this work in the most through way.

Question: “Orion flour mills purchased a new machine and made the following expenditures:”

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

Purchase price	$58,000
Sales tax	5,150
Shipment of machine	830
Insurance on the machine for the first year	530
Installation of machine	1,660

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 particular transaction/event, select “No Journal Entry Required in the first account field.)

View transaction list

Journal entry worksheet

Record the expenditures for the new machine.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
1	Equipment
	Prepaid Insurance
	Cash
	Accounts Payable

Answer

-Journal entry for a new machine-

Explanation- Cost of Machinery = Purchase price + Sales tax+ Shipment of machine+ Installation of machine

= $58000+$5150+$830+$1660

= $65640

Cash paid = Shipment cost+ Prepaid insurance+ Installation costs

= $830+$530+$1660

= $3020

Accounts payable = Purchase price of machine+ Sales tax

= $58000+$5150

= $63150

Relevant knowledge

To calculate the sales tax, multiply the purchase price with the sales tax rate. Convert the sales tax rate to decimal numbers. After the sales tax has been calculated, it is added onto the purchase price. This is the customer’s final cost.

We need to separate the costs necessary to acquire a fixed asset and those that are not. This is necessary because the above-mentioned costs are added to asset purchase price and other costs are deducted from the income statement.

Conclusion

That is how you can solve this kind of questions like “ orion flour mills purchased a new machine and made the following expenditures:”. Please leave a message below if you have any questions or comments.

Thanks for reading!!!