Acquisition Costs The Voiture Company manufactures compact, energy-efficient cars. On April 1, it purchased a machine for its assembly line at a contract price of $200,000 with terms of 2/10, n/30. The company paid the contract price on April 8 and also incurred installation and transportation costs of $5,000, sales tax of $10,000, and testing costs of $2,000. During testing, the machine was accidentally damaged, so the company had to pay $1,000 to repair it. Required Prepare the journal entry to record the acquisition of the machine

Acquisition Costs The Voiture Company manufactures compact, energy-efficient cars. On April 1, it purchased a machine for its assembly line at a contract price of $200,000 with terms of 2/10, n/30. The company paid the contract price on April 8 and also incurred installation and transportation costs of $5,000, sales tax of $10,000, and testing costs of $2,000. During testing, the machine was accidentally damaged, so the company had to pay $1,000 to repair it. Required Prepare the journal entry to record the acquisition of the machine

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 3C: Cost Issues Deskin Company purchased a new machine to be used in its operations. The new machine was...

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Cost Issues Deskin Company purchased a new machine to be used in its operations. The new machine was delivered by the supplier, installed by Deskin, and placed into operation. It was purchased under a long-term payment plan for which the interest charges approximated the prevailing market rates. The estimated useful life of the new machine is 10 years, and its estimated residual (salvage) value is significant. Normal maintenance was performed to keep the new machine in usable condition. Deskin also added a wing to the manufacturing building that it owns. The addition is an integral part of the building. Furthermore, Deskin made significant leasehold improvements to office space used as corporate headquarters. Required: 1. What costs should Deskin capitalize for the new machine? 2. Explain how Deskin should account for the normal maintenance performed on the new machine. 3. Explain how Deskin should account for the wing added to the manufacturing building. Where should the added wing be reported on Deskins financial statements? 4. Explain how Deskin should account for the leasehold improvements made to its office space. Where should the leasehold improvements be reported on Deskins financial statements?
Voiture Company manufactures compact, energy-efficient cars. On April 1, it purchased a machine for its assembly line at a contract price of $600,000 with terms of 2/10, n/30. Voiture paid the contract price on April 8 and also incurred installation and transportation costs of $4,000, sales tax of $48,000, and testing costs of $2,000. During testing, the machine was accidentally damaged, so the company had to pay $1,000 to repair it. Required: Determine the cost of the machine. For each item excluded from property, plant and equipment, how would the item be classified in the financial statements?
im Kwon Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $75,200, the accumulated depreciation is $30,100, its remaining useful life is five years, and its residual value is negligible. On May 4 of the current year, a proposal was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of $156,400. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations: Present Operations Proposed Operations Sales $238,400 $238,400 Direct materials $81,200 $81,200 Direct labor 56,400 — Power and maintenance 5,300 27,800 Taxes, insurance, etc. 1,900 6,200 Selling and administrative expenses 56,400 56,400 Total expenses $201,200…
Bonus Corporation is installing a new machine at its production facility. It has incurred these costs: Purchase price (including input tax of P300,000) P2,800,000 Initial delivery and handling costs 200,000 Costs of site preparation 600,000 Consultants used for advice on the acquisition of the machine 700,000 Installation and assembly costs 500,000 Costs of testing 100,000 Costs of training employees on how to use the machine 80,000 Estimated dismantling costs to be incurred after 7 years 300,000 Operating losses before commercial production 400,000 The cost of the machine is A. 4,900,000 B. 5,200,000 C. 4,200,000 D. 4,980,000
Kim Kwon Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $80,700, the accumulated depreciation is $32,300, its remaining useful life is 5 years, and its residual value is negligible. On May 4 of the current year, a proposal was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of $167,900. The automatic machine has an estimated useful life of 5 years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations: PresentOperations ProposedOperations Sales $255,800 $255,800 Direct materials $87,200 $87,200 Direct labor 60,500 — Power and maintenance 5,600 29,900 Taxes, insurance, etc. 2,000 6,700 Selling and administrative expenses 60,500 60,500 Total expenses $215,800 $184,300…
Assume a (hypothetical) company, Troff erini S. A., incurred the following expendituresto purchase a towel and tissue roll machine: €10,900 purchase price including taxes,€200 for delivery of the machine, €300 for installation and testing of the machine,and €100 to train staff on maintaining the machine. In addition, the company paid aconstruction team €350 to reinforce the factory floor and ceiling joists to accommodatethe machine’s weight. Th e company also paid €1,500 to repair the factory roof (a repairexpected to extend the useful life of the factory by five years) and €1,000 to have theexterior of the factory and adjoining offices repainted for maintenance reasons. Th erepainting neither extends the life of factory and offices nor improves their usability.1. Which of these expenditures will be capitalized and which will be expensed?2. How will the treatment of these expenditures aff ect the company’s financialstatements?
Kim Kwon Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $77,800, the accumulated depreciation is $31,100, its remaining useful life is five years, and its residual value is negligible. On May 4 of the current year, a proposal was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of $161,800. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations: Present Operations Proposed Operations Sales $246,600 $246,600 Direct materials $84,000 $84,000 Direct labor 58,400 — Power and maintenance 5,400 28,800 Taxes, insurance, etc. 1,900 6,500 Selling and administrative expenses 58,400 58,400 Total expenses $208,100…
Extra Corporation is installing a new machine at its production facility. It has incurred these costs: Purchase price (including input tax of P300,000) P2,800,000 Initial delivery and handling costs 200,000 Costs of site preparation 600,000 Consultants used for advice on the acquisition of the machine 700,000 Installation and assembly costs 500,000 Costs of testing 100,000 Costs of training employees on how to use the machine 80,000 Estimated dismantling costs to be incurred after 7 years 300,000 Operating losses before commercial production 400,000 The cost of the machine is Group of answer choices P5,200,000 P4,980,000 P4,900,000 P4,200,000
Kim Kwon Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $94,400, the accumulated depreciation is $37,800, its remaining useful life is five years, and its residual value is negligible. On May 4 of the current year, a proposal was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of $196,400. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations: Present Operations Proposed Operations Sales $299,200 $299,200 Direct materials $102,000 $102,000 Direct labor 70,800 — Power and maintenance 6,600 34,900 Taxes, insurance, etc. 2,400 7,800 Selling and administrative expenses 70,800 70,800 Total expenses $252,600…
Falther Inc. acquired a new processing machine: Invoice cost P1,800,000 Transportation cost 50,000 Installation cost 120,000 The purchase agreement stipulated that if payment is made within 10 days, the entity will receive a 5% discount. However, the entity paid after the discount time had expired. The new entity's main engineer spent two-thirds of his time on the new machine's trial run. The remuneration is P90,000 per month. The company requested for an allowance from the supplier since the machine's performance was below par. A cash allowance of P100,000 was issued by the supplier. The cost of uninstalling the old machine before installing the new unit was P10,000. 1. What amount of should be recorded as cost of the new machine?
Boyer Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $78,100, the accumulated depreciation is $31,200, its remaining useful life is five years, and its residual value is negligible. On May 4 of the current year, a proposal was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of $162,400. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations: PresentOperations ProposedOperations Sales $247,600 $247,600 Direct materials $84,300 $84,300 Direct labor 58,600 — Power and maintenance 5,500 28,900 Taxes, insurance, etc. 2,000 6,500 Selling and administrative expenses 58,600 58,600 Total expenses $209,000…
Boyer Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $54,200, the accumulated depreciation is $21,700, its remaining useful life is five years, and its residual value is negligible. On May 4 of the current year, a proposal was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of $112,700. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations: PresentOperations ProposedOperations Sales $171,800 $171,800 Direct materials $58,500 $58,500 Direct labor 40,700 — Power and maintenance 3,800 20,100 Taxes, insurance, etc. 1,400 4,500 Selling and administrative expenses 40,700 40,700 Total expenses $145,100…