Question

Southwest Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list price of $140,000. The seller agreed to allow a 4% discount b/c Southwest Miling paid cash. Delivery terms were FOB shipping point. Freight Cost amounted to $1,200. Southwest Miling had to hire a specialist to calibrate the loader. The specialist's fee was $1,800. The load operator is paid an annual salary of $60,000. The cost of the company's theft insurance policy increased by $800 per year as a result of acquiring the loader. The loader had a four-year useful life and an expected salvage value of $6,000.

Determine the amount to be capitalized in the asset account for the purchase of the front-end loader.

Answer 1

Answer
Determine cost of assets
1
Costs that are to be capitalized:
List price	$      140,000
Less: Discount ( 140000*4% )	-$         5,600
Freight cost	$          1,200
Specialist fee	$          1,800
Total costs	$      137,400