Determining the cost of an asset
Xpert Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list price of $100,000. The seller agreed to allow a 4 percent discount because Xpert Milling paid cash. Delivery terms were FOB shipping point. Freight cost amounted to $500. Xpert Milling had to hire a consultant to train an employee to operate the loader. The training fee was $1,000. The loader operator is paid an annual salary of $30,000. The cost of the company’s theft insurance policy increased by $800 per year as a result of acquiring the loader. The loader had a four- year useful life and an expected salvage value of $6,500.
Required
a. Determine the amount to be capitalized in an asset account for the purchase of the loader.
b. Record the purchase in general journal format.
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