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ILLUSTRATION: Company A incurred the ff. expenses related to a second-hand machine it purchased: Purchase cost (500,000 downpayment paid in cash, 2-yr noninterest bearing
ILLUSTRATION: Company A incurred the ff. expenses related to a second-hand machine it purchased: Purchase cost (500,000 downpayment paid in cash, 2-yr noninterest bearing note issued for the balance) 3,200,000 Cost of removing old machine replaced 30,000 Cash proceeds from sale of old machine 10,000 General overhaul and repairs to recondition new machine 150,000 Cost of spare parts to cover breakdown 200,000 Cost of installation 80,000 Cost of testing machine prior to use 110,000 Cost of hauling machine from vendor to entity's premises 10,000 Cost of repairing damage to machine caused when machine was dropped during installation 30,000 Repairs incurred during first year of operations 90,000 Safety device added to the machine 250,000 Cost of training workers to operate the machine 20,000 At the time of acquisition, the fair value of similar used machinery is P2,400,000, while new machine had a fair value of P4,000,000. Prepare journal entries to record the above transactions.
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