Determining the cost of an asset
Northeast Logging Co. purchased an electronic saw to cut various types and sizes of logs. The saw had a list price of $120,000. The seller agreed to allow a 5 percent discount because Northeast paid cash. Delivery terms were FOB shipping point. Freight cost amounted to $2,500. Northeast had to hire an individual to operate the saw. Northeast had to build a special platform to mount the saw. The cost of the platform was $1,000. The saw operator was paid an annual salary of $40,000. The cost of the company’s theft insurance policy increased by $2,000 per year as a result of acquiring of the saw. The saw had a four-year useful life and an expected salvage value of $10,000.
Required
Determine the amount to be capitalized in the asset account for the purchase of the saw.
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