Question

At the beginning of the year, Grillo Industries bought three used machines from Freeman Incorporated. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts. Machine A Machine B Machine C
Cost of the asset$9,400 $38,600 $22,400
Installation costs 1,000 2,500 1,600
Renovation costs prior to use 800 2,100 2,600
Repairs after production began 500 1,000 1,100
Compute the cost of the each machine.

Answer 1

Answer:

$11,200

$43,200

$26,600

Explanation:

As per the data given in the question,

Any cost made after the asset is being used will be expensed, except if those cost are use to enhance the earning capacity. So, minor repairs to the asset will not be capitalized.

To compute the cost of machine, cost of asset will include installation costs and renovation cost prior to use.

Cost of Machine A = $9,400 + $1,000 + $800 = $11,200

Cost of Machine B = $38,600 + $2,500 + $2,100 = $43,200

Cost of Machine C = $22,400+$1,600+$2,600 = $26,600