Question

Dalton Company purchased a machine for $12,000, terms 1/10, n/60, FOB shipping point. The seller prepaid the freight charges, $290, and sent a second invoice for the freight. Dalton took advantage of the discount on the first invoice, but the discount was not available on the freight invoice. The machine required a special steel mounting and power connections costing $825, and another $420 was paid to assemble the machine and get it into operation. In moving the machine onto its steel mounting, it was dropped and damaged. The repairs cost $220. Also, $150 of raw materials were used in calibrating (adjusting) the machine so that it would produce the correct quality product. The adjustments were normal for this type of machine and were not the result of the damage. However, the items produced while the adjustments were being made were not saleable. Prepare a calculation to show the cost of this machine for accounting purposes. (Assume Dalton Company pays for the purchase within the discount period.) (Negative answer should be indicated by a minus sign.) Total acquisition costs S 0

Answer 1

Solution:

Dalton Company
Invoice price	12000
Less: Discount	-120
Net Purchase price	11880
Freight charges	290
Mounting and power connections	825
Assembly cost	420
Material used in adjusting	150
Total Acquisition costs	13565