Question

Trinkle Co., Inc. made several purchases of long-term assets in Year 1. The details of each purchase are presented here.

New Office Equipment

1. List price: $37,400; terms: 2/10 n/30; paid within discount period.
2. Transportation-in: $840.
3. Installation: $480.
4. Cost to repair damage during unloading: $694.
5. Routine maintenance cost after six months: $150.

Basket Purchase of Copier, Computer, and Scanner for $50,100 with Fair Market Values

1. Copier, $24,764.
2. Computer, $9,664.
3. Scanner, $25,972.

Land for New Warehouse with an Old Building Torn Down

1. Purchase price, $80,900.
2. Demolition of building, $4,840.
3. Lumber sold from old building, $2,700.
4. Grading in preparation for new building, $8,600.
5. Construction of new building, $226,000.

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

Office equipment:
  

Asset	Allocated Costs
Office equipment

Basket purchase:

Asset	Allocated Costs
Copier
Computer
Scanner
Total

Land and building:
  

Asset	Allocated Costs
Cost of land
Construction costs
Total cost

Answer 1

For Office Equipment

Particulars	Amount
List price	$37,400
Less: Discount (37,400*2%)	$748
Transportation In	$840
Installation	$480
	$39,468

Basket Purchase:

Asset	Fair Market Value	Percent of FMV	Purchase Price	Allocated costs
Office furniture	24,764	41%	50,100	20,541(50,100*41%)
Copier	9,664	16%	50,100	8,016 (50,100*16%)
Computers & Printers	25,972	43%	50,100	21,543 (50,100*43%)
Total	60,400	100%		50,100

Land and Building:

Particulars	Amount
Land:
Purchase price	80,900
Demolition of bran	4,840
Proceeds of bran	(2,700)
Site preparation	8,600
Total cost of land	91,640
Building:
Construction costs	226,000

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