Question

3. The Town of Southwick Fire Department had the following transactions. Prepare journal entries to record them.

1. Placed a purchase order in the amount of $12,000 for department uniforms.
2. Placed a purchase order with a car dealer to replace the fire department’s attack truck. The expected cost of the truck is $92,000.
3. The fire attack truck was delivered to town officials with an invoice of $94,500. The invoice was approved and paid.
4. Unfortunately, some of the uniforms ordered in Transaction 1 were backordered and could not be shipped. However, uniforms that were expected to cost $8,000 were received along with an invoice for $7,900. The invoice was paid when received.
5. The remaining uniforms that were ordered in Transaction 1 were received. The invoice in the amount of $4,000 was paid.

Answer 1

Solution :-

No accounting entry is required to be passed at the time of placing a purchase order of fire department's attack truck and departmental uniforms. Fire Truck is a Tangible asset and classified as vehicle under Property Plant & Equipment. Uniform is a contractual expenditure of the fire department and classified as an operating expense which is to be charged to Profit and Loss account.  

Below are the journal entries to be passed in the books of Fire Department -