Question

Rizio Co. purchases a machine for $12,500, terms 210, n60, FOB shipping point. Rizio paid within the discount period and took the $250 discount. Transportation costs of $360 were paid by Rizio. The machine required mounting and power connections costing $895. Another $475 is paid to assemble the machine, and $40 of materials are used to get it into operation. During installation, the machine was damaged and $180 worth of repairs were made. Compute the cost recorded for this machine.

Answer 1

Answer:

Cost of machine= $14,200

Explanation:

According to International Accounting standards(IAS) 16 property plan and equipment (PPE), the cost of an asset is the purchase cost plus other costs of bringing it to the intended working conditions.  

So we will add the purchase cost to the  installation cost , freight charges.

Note that the cost of the power connections, assembling and material used for installations all represent cost associated to bring the machine into ready for use.

Cost of machine = (12,500 - 250) + 360 + 895  + 475 + 40 + 180=  14,200

Cost of machine= $14,200