Question

Southwest Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list price of $117,200. The seller agreed to allow a 5.25 percent discount because Southwest Milling paid cash. Delivery terms were FOB shipping point. Freight cost amounted to $2,640. Southwest Milling had to hire a specialist to calibrate the loader. The specialist's fee was $810. The loader operator is paid an annual salary of $17,980. The cost of the company's theft insurance policy increased by $1,930 per year as a result of acquiring the loader. The loader had a four-year useful life and an expected salvage value of $14,000. Required Determine the amount to be capitalized in the asset account for the purchase of the front-end loader. (Round your answers to the nearest whole dollar. Amounts to be deducted should be indicated with minus sign.) Costs that are to be capitalized: List price Total costs

Answer 1

ANSWER=

Determination of Amount that to be Capitalised in the Asset Account for Purchase of the Front-End Loader are below:-

Description	Amonunt
Cost That are to be Capitalised:-
List Price	$117200
Less:- Discount	($6153)	=($117200 x 5.25%)
Add:-Frieght Cost	$2640
Specialist Fees	$810
Total Cost:-	$114497

Note:-

i) Loader opreater salary are not directly attributable cost incurred on loader so this was not part of cost i.e. not capitalised.

ii) Also,Companies Theft insurance policy is not only for Loader but for all not included.