Question

Southwest Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list price of $119,170. 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 $2.960. Southwest Milling had to hire a specialist to calibrate the loader. The specialist's fee was $1,010. The loader operator is paid an annual salary of $34,640. The cost of the company's theft insurance policy increased by $1,590 per year as a result of acquiring the loader. The loader had a four-year useful life and an expected salvage value of $7100. 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 Less Discount 119.170 Total costs

1

Answer 1

Costs that are to be capitalized:
List price	119170
Less: Discount	(6256)	=119170*5.25%
Freight cost	2960
Specialist fee	1010
Total costs	116884