Hello,

Can you please help me with this question? I calculated the cost of the equipment but I cannot prepare entries for the purchase of the equipment. Thank you in advance.

Barker Company purchased factory equipment with an invoice price of $55,000.
Other costs incurred were freight costs, $1,300, installation wiring and foundation, $2,500; material and labor costs in testing equipment, $700; oil lubricants and supplies to be used during the first year, $500; 1 year fire insurance policy covering equipment, $1,500. The equipment is estimated to have a $5,000 salvage value at the end of its 10 years useful service life.

a) Calculate the cost of the equipment.
b) Record the purchase of the equipment and calculate the annual depreciation expense (straight-line method).

a) $55,000 Invoice price
$1,300 Freight costs
$2,500 Installation, wiring and foundation costs
$700 Material and labor costs to test the equipment
$59,500 Total Cost.

So various costs are expended before the equiptment is installed ready for use, all are capitalised.expenditure relevant to the operation of the equipment is expensed