I am so stuck! I have spent hours trying to find an
example in my book or on the internet.
Here is the question.
I have to prepare a journal entry to record the
machine's purchase and the costs to ready and install
it. Cash is paid for all costs incurred.

Calhoon purchases a used machine for $167.000 cash on
January 2 and readies it for use the next day at a
$3,420 cost. On January 3, it is installed on a
required operating platform costing $1080, and it is
readied for operation.


I know the total cost will be $171,500
Do I just put one Cash with this total for the credit?

How do I do the journal for the machine, readying and
installing on a operating platform? is it all one
journal entry?

When it posts to a ledger it will all go to machine expense,which is why I think I only need one journal entry for all three purchases.

I know we are suppose to try for an answer so here is what I think I should do.


Machine expense debit $167,000
Machine expense Ready machine for use debit $3420
Machine expense install on platform debit $1,080
Cash credit $171,500
To record buying machine and getting it ready for use

Thank you in advance for your help!
Connie

morgaine300

Hi. First, it's not an expense. It's an asset. Don't use the word "expense" on asset accounts. Second, don't describe the entry. i.e. "ready machine for use" is not an account name, it's a description of what you did. The account is just Machine, and that same account is used for all 3 numbers. Journal entries are always account names, not descriptions. (i.e. if you paid the telephone bill, it's a debit to Telephone Expense, not to Paid Telephone bill. That isn't an account name. If you want a description, put it underneath the entry itself.)

As for whether it's one entry or 3... I can't really answer that. Theoretically, if these things were paid on 3 different days, you'd have a separate entry on each day that would debit the Machine and credit the Cash. Of course, someone could do this entry as a lump at the end of the month too. For the sake of a class problem, you probably would just make one entry.

What I can tell you is that if you're going to do it as one entry and credit the Cash for the total, then also make it one debit to the Machine account for the total. There isn't any reason to split the debit into three parts like this. What goes into that account is all things that are part of the cost of the machine, so in essense, they are actually all the same thing: part of the cost.

This is my opinion. No guarantees your instructor won't feel differently.