Question

Holiday Laboratories purchased a high-speed industrial centrifuge at a cost of $330,000. Shipping costs totaled $16,000. Foundation work to house the centrifuge cost $7,500. An additional water line had to be run to the equipment at a cost of $2,800. Labor and testing costs totaled $5,400. Materials used up in testing cost $2,200. The capitalized cost is:

   

Multiple Choice

• $356,300.

• $363,300.

• $363,900.

• $346,000.

Answer 1

Calculation of capitalized cost:

Particulars	Amount
Cost of centrifuge	$330,000
Add: all costs attributable to the asset for its ready for use or put to use
Shipping cost	$16,000
Foundation work cost	$7,500
Additional water line cost	$2,800
Labor and testing cost	$5,400
Material used in testing cost	$2,200
Total capitalized cost	$363,900

Note:

Capitalized cost includes all the costs that are attributable to the asset for its ready for use or put to use.

Shipping cost , foundation word cost , additional water line, labor and testing cost and materials used in the testing will be included in the capitalized cost since these costs are attributable to the asset for its ready for use or put to use.