Question

Colby ltd purchased equipment and incurred the costs listed below. for which of the costs shown...

Colby ltd purchased equipment and incurred the costs listed below. for which of the costs shown below is it correct to capitalize the cost and include it in the equipment account balance?

a) training workers to use the equipment

b) freight costs to ship equipment to Colby, FOB shipping point

c) cost of additional electricity used by the equipment after it was installed

d) annual premium for insurance on the equipment after it is acquired

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The costs which are incurred till an equipment is kept ready for its use is only capitalized in the equipment account balance. Costs after the equipment gets ready for its use should not be capitalized.

a) Incorrect : Charges for training workers to use a new equipment should not be capitalized since it is a cost after installation of the equpment.

b) Correct : freight cost to ship equipment to Colby should be capitalized since it is a cost before its installation.

c) Incorrect : cost of additional electricity used by the equipment after its installation should not be capitalized since it is a cost after installation of the equpment.

d) Incorrect : annual premium for insurance on the equipment after it is acquired should not be capitalized since it is a cost after installation of the equpment.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Roosevelt Manufacturing recently purchased a new piece of equipment. The equipment was originally listed at a...
Roosevelt Manufacturing recently purchased a new piece of equipment. The equipment was originally listed at a price of $45,000, but Roosevelt negotiated the invoice price down to $40,000. In addition to the invoice price, Roosevelt paid sales tax of $2,000 on the purchase, costs to have the equipment shipped and installed at Roosevelt’s warehouse of $5,000, and insurance for the first year of operation of $4,000. What amount should Roosevelt capitalize on the balance sheet related to the equipment purchase?...
Clutch Company purchased equipment and incurred the following costs as part of the purchase: Purchase price...
Clutch Company purchased equipment and incurred the following costs as part of the purchase: Purchase price $10,000 Transportation costs $500 Repair for damage incurred during installation $250 Installation costs $550 Sales tax $750 What amount should Clutch capitalize as the cost of the equipment? 12,050 11,800 11,000 10,750
Mad Hatter Enterprises purchased new equipment for $360,000, terms f.o.b. shipping point. Other costs connected with...
Mad Hatter Enterprises purchased new equipment for $360,000, terms f.o.b. shipping point. Other costs connected with the purchase were as follows: State sales tax $ 28,700 Freight costs 5,100 Insurance while in transit 750 Insurance after equipment placed in service 1,150 Installation costs 1,750 Insurance for the first year of operations 2,150 Testing $ 650 Required: Determine the capitalized cost of the equipment.
Classify Costs Following is a list of various costs incurred in producing replacement automobile parts. With...
Classify Costs Following is a list of various costs incurred in producing replacement automobile parts. With respect to the production and sale of these auto parts, classify each cost as either variable costs, fixed costs, or mixed costs. 1. Oil used in manufacturing equipment 2. Plastic 3. Property taxes, $165,000 per year on factory building and equipment 4. Salary of plant manager 5. Cost of labor for hourly workers 6. Packaging 7. Factory cleaning costs, $6,000 per month 8. Metal...
Listed below are costs (or discounts) to purchase or construct new plant assets. Indicate whether the...
Listed below are costs (or discounts) to purchase or construct new plant assets. Indicate whether the costs should be expensed or capitalized (included in the cost of the plant assets on the balance sheet.) For costs that should be, indicate in which category of plant assets (Equipment, Building, or Land) the related costs should be recorded on the balance sheet. a. cost to install needed electrical lines in new building b. cost to build a base of new equipment c....
1.   Presto Company purchased equipment and these costs were incurred: Cash price $65,000 Sales taxes 3,600...
1.   Presto Company purchased equipment and these costs were incurred: Cash price $65,000 Sales taxes 3,600 Insurance during transit 640 Installation and testing  860 Total costs $70,100 Presto will record the acquisition cost of the equipment as a. $65,000. b. $68,600. c. $69,240. d. $70,100. 2. A company purchased factory equipment on April 1, 2015 for $160,000. It is estimated that the equipment will have a $20,000 salvage value at the end of its 10-year useful life. Using the straight-line method...
Presented below is information related to Chile Co. 1. On April 5, purchased merchandise from Graham...
Presented below is information related to Chile Co. 1. On April 5, purchased merchandise from Graham Company for $16,000, terms 2/10, net/30, FOB shipping point. 2. On April 6, paid freight costs of $800 on merchandise purchased from Graham. 3. On April 7, purchased equipment on account from Reed Mfg. Co. for $27,000. 4. On April 8, returned merchandise, which cost $4,000, to Graham Company. 5. On April 15, paid the amount due to Graham Company in full. Instructions (a)...
[The following information applies to the questions displayed below.] Listed here are the total costs associated...
[The following information applies to the questions displayed below.] Listed here are the total costs associated with the 2017 production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $549 each.    Costs 1. Plastic for casing—$17,000 2. Wages of assembly workers—$91,000 3. Property taxes on factory—$6,000 4. Accounting staff salaries—$40,000 5. Drum stands (1,000 stands purchased)—$34,000 6. Rent cost of equipment for sales staff—$36,000 7. Upper management salaries—$220,000 8. Annual flat fee for factory maintenance service—$21,000...
[The following information applies to the questions displayed below.] Listed here are the total costs associated...
[The following information applies to the questions displayed below.] Listed here are the total costs associated with the 2017 production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $459 each. Costs 1. Plastic for casing—$20,000 2. Wages of assembly workers—$90,000 3. Property taxes on factory—$5,000 4. Accounting staff salaries—$35,000 5. Drum stands (1,000 stands purchased)—$38,000 6. Rent cost of equipment for sales staff—$24,000 7. Upper management salaries—$120,000 8. Annual flat fee for factory maintenance service—$18,000 9....
1.On January 6, Year 1, Mount Jackson Corporation purchased a tract of land for a factory...
1.On January 6, Year 1, Mount Jackson Corporation purchased a tract of land for a factory site for $795,000. An existing building on the site was demolished and the new factory was completed on October 11, Year 1. Additional cost data are shown below: Construction cost of new building $ 952,000​ Real estate and attorney fees 14,000​ Architect fees 78,000​ Cost to demolish old building 72,900​ Salvage recovery from old building (10,000) ​ Which of the following are the capitalized...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT