Question

Holiday Laboratories purchased a high-speed industrial centrifuge at a cost of $440,000. Shipping costs totaled $30,000. Foundation work to house the centrifuge cost $8,600. An additional water line had to be run to the equipment at a cost of $3,000. Labor and testing costs totaled $5,300. Materials used up in testing cost $2,600. The capitalized cost is:__________.
a. $489,900.
b. $470,000.
c. $481,600.
d. $489,500.

Answer 1

Answer:

d. $489,500

Explanation:

The capitalized cost will include all the costs incurred by Holiday laboratories to readily make the asset for use.

Therefore,

Capitalized cost = High speed industrial centrifuge + Shipping cost + Foundation cost + Equipment cost + Labor and testing cost + Material cost

= $440,000 + $30,000 + $8,600 + $3,000 + $5,300 + $2,600

= $489,500

Answer 2

Based on the costs incurred for the fixed asset, the capitalized cost will be a. $489,900

When it comes to fixed assets, all the costs that were needed to acquire the asset and install it will be capitalized.

The capitalized cost is therefore:

= Cost of equipment + Shipping cost + Foundation work cost + Additional water line cost + Labor costs + Materials cost

= 440,000 + 30,000 + 8,600 + 3,000 + 5,300 + 2,600

= $489,500

In conclusion, the capitalized cost was $489,500

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