Question

Southwest Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list price of $118,660. The seller agreed to allow a 4.25 percent discount because Southwest Milling paid cash. Delivery terms were FOB shipping point. Freight cost amounted to $2,640. Southwest Milling had to hire a specialist to calibrate the loader. The specialists fee was $1,160. The loader operator is paid an annual salary of $18,160. The cost of the companys theft insurance policy increased by $2,040 per year as a result of acquiring the loader. The loader had a four-year useful life and an expected salvage value of $14,000.RequiredDetermine 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.Cost that are to be capitilized AnswerList Price _______Either ADD or Less: Discount _______Either ADD or Less: Discount _______Either ADD or Less: Discount _______Total Costs $0

Answer 1

Answer:

$117,417

Explanation:

Calculation to Determine the amount to be capitalized in the asset account

Costs that are to be capitalized:

List price $118,660

Less: Discount ($5,043)

($118,660*4.25%)

Freight cost $2,640

Specialist fee $1,160

Total costs $117,417

Therefore the amount to be capitalized in the asset account will be $117,417