Question

14. 6 17.00 points hor Company scount on the purchase. The machine was delivered under terms FOB shipping point, and freight costs purchased a manufacturing machine with a list price of $95,000 and received a 2% cash d to $4,200. Anchor paid $6,000 to have the machine installed and tested. Insurance costs to protect the asset from fire and theft amounted to $7.800 for the first year of operations. Based on this nformation, the amount of cost recorded in the asset account would be: O $103,300. O $97.300 O $11100. O $93100

Answer 1

The correct answer is $103,300

List Price= $95,000

Less: Cash discount 2% = 1,900

Net price = $93,100

Add: Freight $4,200

Add: installation charges $6,000

Total amount to be capitalised =$ 103,300

Insurance charges are not capitalised with the cost of the machine. It is an expense.