On january 1 2006 solomon company purchased the following, Ask an Expert

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On January 1, 2006, Solomon Company purchased the following two machines for use in its production process.

Machine A: The cash price of the machine was $38,500. Related expenditures included sales tax $2,200, shipping costs $175, insurance during shipping $75, installation and testing costs $50, and $90 of oil and lubricants to be used with the machinery during its first year of operation. Solomon estimates that the useful life of operation is 4 years with a $5,000 salvation value remaining at the end of that time period.

Instructions: Prepare the following for Machine A.

a. The journal entry to record its purchase on January 1, 2006.

b. The journal entry to record annual depreciation at December 31, 2006, assuming the straight-line method of depreciation is used.
(a)(2) $9,000

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9277721

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