Question

Anchor Company purchased a manufacturing machine with a list price of $85,000 and received a 2% cash discount on the purchase. The machine was delivered under terms FOB shipping point, and transportation costs amounted to $2,200. Anchor paid $3,000 to have the machine installed and tested. Insurance costs to protect the asset from fire and theft amounted to $3,800 for the first year of operations. What is the cost of the machine?

$88,500

$85,500

$92,300

$83,300

Answer 1

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Cost of Machine	Amount ($)
List Price	85,000.00
Less: 2% cash discount	1,700.00
Add: Transportation costs	2,200.00
Add: Installation costs	3,000.00
Cost of Machine	88,500.00
Note: Insurance cost is an expense. It will not be a part of asset cost.