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Property, Plant and Equipment

The document details the purchase of a new machine including its total cost of $498,800 which is recorded through a journal entry debiting machine, inventory, prepaid service contract and TVA, and crediting cash. It also provides examples of how to calculate the carrying value of a furnace and aircraft by adjusting for replacements and additions to existing assets.

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62 views1 page

Property, Plant and Equipment

The document details the purchase of a new machine including its total cost of $498,800 which is recorded through a journal entry debiting machine, inventory, prepaid service contract and TVA, and crediting cash. It also provides examples of how to calculate the carrying value of a furnace and aircraft by adjusting for replacements and additions to existing assets.

Uploaded by

AA BB MM
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Property, Plant and Equipment

Cost of the machine:


Purchase price 500,000
(-) trade discount (30,000)
470,000
Delivery charge 4,300
Installation and testing charge 24,500
Cost of machine 498,800

Journal entry:
Dr Cr
Machine 498,800
Inventory 5,200
Prepaid service contract 36,000
TVA 108,000
Cash 648,000

Example 1
Carrying value of furnace = 320,000 – 10,000 (old wall lining) + 80,000 (new wall lining) =
390,000
Carrying value of aircraft = 1,200,000 – 70,000 (old contract) + 250,000 (new contract) =
1,380,000

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