Mason Ltd. purchased, for cash, equipment with an invoice price of $90,000.

Mason Ltd. purchased, for cash, equipment with an invoice price of $90,000. Other costs incurred were freight costs, $1,400; insurance while the equipment was in transit, $1,200; material and labour costs in testing equipment, $2,000; oil lubricants and supplies to be used while operating the equipment, $850; annual fire insurance policy covering equipment after it was put in use, $900; import duties $400. The equipment is estimated to have an $8,000 residual value at the end of its 10-year useful service life.

REQUIRED:

Calculate the cost of the equipment.
Record the purchase of the equipment.
Prepare the journal entry for the annual depreciation, assuming the straight-line method of depreciation is used.

Solutions

Expert Solution

a. Cost of equipment = $90,000 + $1400 + $1200 + $2000 + $400 = $95,000

Transaction	Account	Debit	Credit
b.	Equipment	$95,000	-
	Cash	-	$95,000

c.	Depreciation expense ($95,000 - $8,000) / 10	$8,700	-
	Accumulated depreciation	-	$8,700

ekkarill92 answered 1 year ago

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