On January 1, 2012, Jackson Company purchased factory equipment priced at $55,000. Sales tax was an additional 6%, and the company spent $4,000 to install the machinery. After the company began using the machine (placed in service), there were additional costs of $800 for insurance and $1,200 for maintenance.
The estimated useful life of the machine was five years and residual value was expected to be $6,300. The equipment is expected to produce 200,000 units during its useful life.
Required:
1. At what amount should Jackson record the purchase of the machine?What is the appropriate treatment for the maintenance and insurance?
2. Prepare the journal entry to record depreciation for 2012, assuming the company uses the straight-line method.