Question

On February 29, 2018 Mining Co purchases a new ore hauling truck. The purchase price of the truck is $120,000. In addition, Mining Co paid: $6,000 in sale tax on this purchase, $2,800 to have the truck shipped to their location, $500 in special transit insurance, and $4,000 to a mechanic prepare the truck for use. Prepare the journal entry for the truck purchase, assuming all amounts are paid in cash.

Answer 1

Purchase of truck
Date	Accounts title	Debit	Credit
29 feb .2019.	Truck	$ 1,33,300.00
	Cash		$    1,33,300.00
	(To record purchase of Truck)

Equipment account could also be used alternatively.

Calculation of value of equipment purchased.

Purchase price	$ 1,20,000.00
Sales tax	$        6,000.00
Shipping cost	$        2,800.00
Insurance during shipping	$            500.00
Installation cost	$        4,000.00
Total cost of truck	$ 1,33,300.00

Every cost that is nessasary to brink an asset fit for its use is a cost of that asset.