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534 Chapter 10 Acquisition and Disposition of Property, Plant,, and Equipment Purchase Cash paid for equipment, including sales tax of $5,000 Freight and insurance cost while in transit Cost of moving equipment into place at factory Wage cost for technicians to test equipment Insurance premium paid during first year of operation on this equipment Special plumbing fixtures required for new equipment Repair cost incurred in first year of operations related to this equipment $105,000 2,000 3,100 4,000 1,500 8,000 1,300 Construction Material and purchased parts (gross cost $200,000; failed to take 2 % cash discount) Imputed interest on funds used during construction (stock financing) Labor costs Allocated overhead costs (fixed-$20,000; variable-$30,000) Profit on self-construction Cost of installing equipment $200,000 14,000 190,000 50,000 30,000 4,400 Instructions Compute the total cost for each of these two pieces of equipment. If an item is not capitalized as a cost of the equipment, indicate how it should be reported. ntion incurred the follow-

Answer 1

	Total Cost of Equipment
	Cash paid for Equipment including sales tax	$ 1,05,000.00
	Freight & Insurance cost while in transit	$       2,000.00
	Cost of moving equipment into place at factory	$       3,100.00
	Wage cost of equipment to test the equipment	$       4,000.00
	Special plumbing equipment required for new equipment	$       8,000.00
	Total Cost of Equipment	$ 1,22,100.00
	Insurance Premium paid reported in the profit & loss statement as Insurance Expense for $1500.
	Repair cost of equipment reported in the profit & loss statement as Repair & Maintenance Expense for $1300.
	All expenses up to put to use of fixed assets should be capitalized.
	Total cost of Construction
	Material and purchased parts($200000*.98)	$ 1,96,000.00
	Labor cost	$ 1,90,000.00
	Overhead cost	$     50,000.00
	Cost of installing Equipment	$       4,400.00
	Total cost of Construction	$ 4,40,400.00
	Material and purchased parts cost after discount is taken because is cash equivalent price.
	Imputed interest on funds used during construction(Stock financing ) is treated as opportunity cost and it should not be reported.