On November 20, 2017, McCourty Safety Systems ordered a packaging machine for its factory from Chung Industries at a price of $142,500.
McCourty Safety Systems arranged to have the machine delivered to its factory to be delivered by Gilmore Transportation at a cost to McCourty of $10,800.
On December 29, 2017, McCourty Safety Systems received the packaging machine at its factory with invoices from Chung Industries and Gilmore Transportation for the price of the machine, $142,500, and the freight charges, $10,800, per the original order
On December 30, 2017 McCourty Safety Systems completed the installation and testing of the packaging machine at costs of $9,870 and $4,920, respectively.
On December 31, 2017, McCourty Safety Systems purchased a one-year insurance policy on the packaging machine beginning on January 1, 2018 at a cost of $3,600.
To comply with GAAP, McCourty Safety Systems recorded the packaging machine at a total historic cost value of:
In its GAAP balance sheet at December 31, 2017, McCourty Safety Systems reported the packaging machine at a total value of:
The value of the packaging machine in its GAAP balance sheet would include the following costs:
Purchase price + Freight charges + Insatallation cost + testing cost =
$142500 + $10800 + 9870 + 4920 = $168090
$168090 will be the value shown in the balance sheet.
Only those costs which are required to bring the machine to the present location and working condition are included in the machine's cost. Here the purchase cost of the insurance policy is not included because insurance is a recurring cost and also it is not required to bring the machine to the present location and working condition.
On November 20, 2017, McCourty Safety Systems ordered a packaging machine for its factory from Chung...
What should Ajanta do about its recent order from SF? AJANTA PACKAGING: KEY ACCOUNT MANAGEMENT Sandeep Puri and Rakesh Singh wrote this case solely to provide material for class discussion. The authors do not intend to iustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the...