10 “BULLETIN 865, U. S. DEPARTMENT OF. AGRICULTURE. 
time, the purchase 
division of these 
r 
lings. 
As the land and buildings are frequently purchased at the same 
price will include both assets. Care must be exercised that a prope 
assets is made as depreciation is to be figured only upon the hee Idina: 
MACHINERY 4 AND EQUIPMENT (C SE 
DEBIT: CREDIT: 
1. With the cost of all the machinery 1. With the total book value of any ma- 
as shown by the Balance Sheet at chimery and equipment that is sold 
the time of opening the books. or discarded. 
2. With the cost of additions cr alter- 
ations provided the efficiency is 
materially increased. 
3. With freight, express, and drayage | 
charges on any purehase. 
4. With cost of installation. 
This account should be charged with the costs of all items of machinery and equip- 
ment, whieh, under ordinary cireumstances, will last three years or more, such as 
engines, boilers, motors, ete. When any article which has been charged to this account 
is to be e placeds the asset account should be credited with the cost value placed on 
this item at the time of opening the books or at the time of subsequent purchase. 
Example: A piece of machinery costing $100 was replaced by anew one costing $150, 
cash being paid for the new article. The Journal entry would be made as follows: 
DEBIT. CREDIT. 
$100 Reserve for Depreciation on Machinery and Equipment. 
Machinenyandsliqurputermt.---es-1 2 ee ae S109 
(For discarded machine costing $100.) 
150 Machinery and Equipment. 
> BanksAecounta2 3. 2 oa eo 156 
(For purchase of new machine.) 
To the invoice value of any machinery purchased should be added any expense in- 
curred, such as freight or installation charges. In case the amount set aside as Re- 
serve for Depreciation on Plant is not sufficient to cover the original cost of the item 
replaced, the loss sustained should be charged to an account specifically captioned. 
Exampie: A boiler costing $150 was completely destroyed by an explosion. At the 
time the account Reserve for Depreciation on Machimery and Equipment shows a 
credit balance of $100. It was necessary to pay $200 for a similar boiler. The follow- 
ing Journal entries should be made: 
DEBIT. | CREDIT: 
$50 Reserve for Depreciation on Machinery and Equipment. 
160 Loss, boiler explosion. 
Machinery and Equipment......-.-...---.-- $150 
(For loss on Machinery and Equipment on account of explosion.) 
200 Machinery and Equipment. 
Bank account. 2abiie penance ae eee 200 
(For purchase of new boiler.) 
In the above entries it should be carefully noted that the full amount set aside as 9 
Reserve for Depreciation on Machinery and equipment has not been entirely ex- 
hausted by this loss, inasmuch as this fund is set aside to cover depreciation on all the 
machinery and equipment, and only the relative proportion applying to the boiler can 
be charged to the reserve account. 
€. 
