Question

Trinkle Company made several purchases of long-term assets in 2018. The details of each purchase are presented here.

New Office Equipment

1. List price: $41,600; terms: 2/10, n/30; paid within the discount period.

2. Transportation-in: $830.

3. Installation: $540.

4. Cost to repair damage during unloading: $510.

5. Routine maintenance cost after eight months: $180.

Basket Purchase of Copier, Computer, and Scanner for $48,100 with Fair Market Values

1. Copier, $23,780.

2. Computer, $6,380.

3. Scanner, $27,840.

Land for New Warehouse with an Old Building Torn Down

1. Purchase price, $79,100.

2. Demolition of building, $4,670.

3. Lumber sold from old building, $1,670.

4. Grading in preparation for new building, $8,300.

5. Construction of new building, $203,000.

Required

In each of these cases, determine the amount of cost to be capitalized in the asset accounts.

Office equipment:

Basket purchase:

Land and building:

Answer 1

1) Capitalized Amount for Office Equipment :-

Particulars	Amount ($)
Price	41600
Add : Transportation in	830
Add : Installation	540
Less : Discount ($41600*2%)	(832)
Total	42138

2) Basket Purchase :-

Asset	Fair Market Value(a)	% of FMV(b)	Purchase(c)	Allocated Cost (b*c)
Copier	$23780	41%	$48100	$19721
Computers	$6380	11%	$48100	$5291
Scanner	$27840	48%	$48100	$23088
Total	$58000	100%		$48100

3) Land and Building :-

Cost of Land :-

Particulars	Amount($)
Purchase Price	79100
Add : Demolition of Building	4670
Add : Grading in Preparation for new building	8300
Less : Lumber sold from old building	(1670)
Total Cost of Land	90400

Land and Building :-

Assets	Allocated Costs
Cost of land (see above)	$90400
Construction	$203000
Total Cost	$293400