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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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AA BB MM
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21 views

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
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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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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