[slh6582]

I need a little help on a homework problem... we are learning how to journalize the cost of plant assets... I don't have my book in front of me so I'm going to make up some numbers... Say a machine is bought on Jan 1, 2006 with a cash value of 25,000. Related Expendiutres include sales tax for 5,000, shipping cost for 1,000, and 500 worth of oil and lubricates to be used with the machine during its first year of operation. The directions require me to journalize the purchase of the machine on jan. 1, 2006. Now my question is what do I do to record the oil and lubricate.. I don't think it is included with the cost of machinery.

Is this right
DR Factory Machinery 31,000
CR Cash 31,000

Or is this right
DR Factory Machinery 31,000
DR Oil Expense 500
CR Cash 31,500

[pready]

Debit Machinery for the Cost of Machinery plus any costs used to receive the machinery, intall it and to get it operation.
Credit the appropriate accounts like cash or accounts payable.

Debit Oil and Lubricant Expense for 500
Credit Cash (if paid by cash) or Accounts Payable (if on account) for 500