Question

Grab Manufacturing Co. purchased a 10-ton draw press at a cost of $181,000 with terms of 5/15, n/45. Payment was made within the discount period. Shipping costs were $4,800, which included $370 for insurance in transit. Installation costs totaled $12,500, which included $5,200 for taking out a section of a wall and rebuilding it because the press was too large for the doorway. The capitalized cost of the 10-ton draw press is:

Multiple Choice

$189,250.

$194,250.

$192,750.

$187,250.

Answer 1

Please find below answers ;

Cost of the 10 ton draw press $ 181,000

Less : discount 5% = $ 181,000*5% = $9,050 ( This has been trated as a cash payment discount which has reduced the cost of purchase that is the reason it has been deducted. )

Add : Shipping cost ; = $ 4,800

; Installation cost : $ 12500

Total = $ 181000-9050+4800+12500 = $189,250 . First one .

Note : cost of equipment includes includes every cost which has been incurred from time of purchase to installation for its intended use. On account of this reason shipping and installation cost are added as they were necessary cost to be incurred to make equpiement ready to use.