Question

Exercise 8-1 Cost of plant assets LO C1 Rizio Co. purchases a machine for $11,300, terms 2/10, n/60, FOB shipping point. The seller prepaid the $255 freight charges, adding the amount to the invoice and bringing its total to $11,555. The machine requires special steel mounting and power connections costing $781. Another $368 is paid to assemble the machine and get it into operation. In moving the machine to its steel mounting, $360 in damages occurred. Materials costing $40 are used in adjusting the machine to produce a satisfactory product. The adjustments are normal for this machine and are not the result of the damages. Complete the below table to calculate the cost recorded for this machine. (Rizio pays for this machine within the cash discount period.) Amount Included in Cost of Equipment: Invoice price of machine Net purchase price Total cost to be recorded

Answer 1

Amount Included in Cost of Equipment:
Invoice price of machine	11300
Less: Discount	(226)	=11300*2%
Net purchase price	11074
Freight charges	255
Mounting and power connections	781
Assembly	368
Materials used in adjusting	40
Total cost to be recorded	12518
Note: Discount can alternatively be written without parenthesis