Question 4)
Rolland Company paid $250,000 to acquire a 50 ton press, $11,200 in freight charges, $3,500 for installation and $600 for testing. During installation, a Rolland employee accidentally broke a part that was repaired for $300.
What is the capitalized cost of the press? $264,700 $265,300 $265,600 $261,200
5) Patel Company purchased a factory including the land, a building, and factory machinery for $1,050,000. The fair values of the purchased assets were:
| Land | $125,000 |
| Building | $655,000 |
| Factory machinery | $220,000 |
The amount allocated to the factory machinery is:
| $220,000 |
| $131,250 |
| $250,000 |
| $231,000 |
Ans:
4)option "$265,300" is correct
working:
Amount to be capitalized to the Equipment Account = Purchase Price + Freight Charges + Installation cost + Testing Charges
= $250,000 + $11,200 + $3,500 + $600 = $265,300
Note:
1)repair cost is not capitalized because it does not enhance capacity or life of the press so it is revenue item included in income statement
5) option $ 231,000 is correct
Working:
Total Asset Fair Value = Land + Building + Factory machinery
Total Asset Fair Value = 125,000+655,000+220,000
Total Asset Fair Value = $1,000,000
So The amount allocated to the factory machinery is:
$220,000*$1,050,000/$1,000,000= $231,000
Question 4) Rolland Company paid $250,000 to acquire a 50 ton press, $11,200 in freight charges,...
Gomez Corporation purchased land, land improvements, and a building for $480,000. The assets are valued as follows: Asset Appraised Value Land $100,000 Land Improvements 75,000 Building 325,000 How much should be debited to each account? Rolland Company paid $250,000 to acquire a 50 ton press, $11,200 in freight charges, $3,500 for installation and $600 for testing. During installation, a Rolland employee accidentally broke a part that was repaired for $300. What is the capitalized cost of the press? $264,700 $265,300...