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    Machinery and Capitl Expenditures

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    Zes O
    Negros Company acquired new machinery for $1,400,000 and incurred additional costs of $40,000 for freight, $15,000 to remove the old machinery, $50,000 for installation, and $30,000 for testing. The total capitalized cost of the new machinery should be $1,500,000. Shaw Company purchased a machine for $1,260,000 and incurred $30,000 for shipping, $40,000 for installation, and $50,000 for testing, for a total capitalized cost of $1,380,000. Charry Company is purchasing a used polishing machine for $8,000,000 and will incur $400,

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    Machinery and Capitl Expenditures

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    Zes O
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    Negros Company acquired new machinery for $1,400,000 and incurred additional costs of $40,000 for freight, $15,000 to remove the old machinery, $50,000 for installation, and $30,000 for testing. The total capitalized cost of the new machinery should be $1,500,000. Shaw Company purchased a machine for $1,260,000 and incurred $30,000 for shipping, $40,000 for installation, and $50,000 for testing, for a total capitalized cost of $1,380,000. Charry Company is purchasing a used polishing machine for $8,000,000 and will incur $400,

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    Negros Company acquired new machinery for $1,400,000 and incurred additional costs of $40,000 for freight, $15,000 to remove the old machinery, $50,000 for installation, and $30,000 for testing. The total capitalized cost of the new machinery should be $1,500,000. Shaw Company purchased a machine for $1,260,000 and incurred $30,000 for shipping, $40,000 for installation, and $50,000 for testing, for a total capitalized cost of $1,380,000. Charry Company is purchasing a used polishing machine for $8,000,000 and will incur $400,

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    862 views3 pages

    Machinery and Capitl Expenditures

    Uploaded by

    Zes O
    Negros Company acquired new machinery for $1,400,000 and incurred additional costs of $40,000 for freight, $15,000 to remove the old machinery, $50,000 for installation, and $30,000 for testing. The total capitalized cost of the new machinery should be $1,500,000. Shaw Company purchased a machine for $1,260,000 and incurred $30,000 for shipping, $40,000 for installation, and $50,000 for testing, for a total capitalized cost of $1,380,000. Charry Company is purchasing a used polishing machine for $8,000,000 and will incur $400,

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    © All Rights Reserved
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    MACHINERY AND CAPITL EXPENDITURES

    Problem 31-1
    Negros Company acquired new machinery. The following data are available:
    List price of the machinery 1,400,000
    Cash discount available but not taken on purchase 20,000
    Freight paid on the new machinery 40,000
    Cost of removing of the old machinery 15,000
    Installation cost of the new machinery 50,000
    Testing cost before the machinery was put into
    regular operation (including P10, 000 in wages
    of the regular machinery operator) 30,000
    Loss on premature retirement of the old machinery 5,000
    Estimated cost of maturing similar machinery
    in the entity’s own plant, including overhead 1,300,000
    The amount should be capitalized as cost of the machinery?
    a. 1,500,000
    b. 1,490,000
    c. 1,515,000
    d. 1,520,000

    Solution 31-1 answer a


    List price 1,400,000
    Cash discount (20,000)
    Freight 40,000
    Installation cost 50,000
    Testing cost 30,000
    Total cost 1,500,000
    The cost of removing the old machinery is treated as outright expense.
    Problem 31-2
    On October 1, 2010, Shaw Company purchased a machine for P 1,260,000 that was placed in service
    on November 30, 2010. Shaw incurred additional costs of this machine as follows:
    Shipping 30,000
    Installation 40,000
    Testing 50,000
    In Shaw’s December 31,2010 statement of financial position, what amount be reported as
    machinery?
    a. 1,260,000
    b. 1,290,000
    c. 1,330,000
    d. 1,380,000
    e.

    Solution 31-2 answer d


    All cost are capitalizable.
    Problem 31-3
    Charry Company is purchasing a second-hand polishing machine. The entity will incur the following
    costs:
    Agreed price to be paid to vendor 8,000,000
    Dismantling the machine at its current location 400,000
    Transportation to Charry’s factory 350,000
    Machine refurbishment costs prior to reinstallation 175,000
    Reinstallation 125,000
    What is the cost of second-hand machine?
    a. 8,875,000
    b. 9,050,000
    c. 8,125,000
    d. 8,000,000

    Solution 31-3 answer b


    All cost are capitalizable.

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