Marburg Manufacturing Company purchased a machine on January 2, 2021.The invoice price of the machine was P4,000,000, and the vendor offered a 3percent discount for payment within ten days. The following additional costswere incurred in connection with the machine:Transportation-in120,000Installation cost70,000Testing costs prior to regular operation55,000If the invoice is paid beyond the discount period, Marburg should record theacquisition cost of the machine at what amount?

The cost of plant, property and equipment includes purchase prices, transportation cost, testing…

Answered: arburg Manufacturing Company purchased…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Holly Springs, Inc. contracted with Coldwater Corporation to have constructed a custom-made lathe. The machine was completed and ready for use on January 1, 2021. Holly Springs paid for the lathe by issuing a $300,000 note due in three years. Interest, specified at 2%, was payable annually on December 31 of each year. The cash market price of the lathe was unknown. It was determined by comparison with similar transactions for which 6% was a reasonable rate of interest. Holly Springs uses the effective interest method of amortization. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1). (Use appropriate factor(s) from the tables provided.) Required:1. Prepare the journal entry on January 1, 2021, for Holly Springs’ purchase of the lathe.2. Prepare an amortization schedule for the three-year term of the note.3. Prepare the journal entries to record (a) interest for each of the three years and (b) payment of the note at maturity.
Daggy Company started a research and development project on a new fiber optic cable capable of greaterbandwidth and full duplex voice calls on March 1, 2021. Total cost incurred before reaching technologicalfeasibility amounted to P4,000,000 while development cost after reaching technological feasibility amountedto P5,000,000 before year end.Prior to commercial production, Daggy paid legal and registration fees amounting to P1,000,000 in filing forpatent on the new product on July 1, 2021. Early in January 2022 an additional amount of P2,000,000 wasincurred to develop the project to full manufacturing stage. The patent was approved in early January 2022and valid until December 31, 2041.However, Daddy expected technological advancements will render the new product virtually obsolete byDecember 31, 2026. Daggy planned to develop a new product by that time and apply for a new patent for theupgraded fiber optic cable by the end of 2026. Any capitalized development cost should be amortized…
Gilroy Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,140. The freight and installation costs for the equipment are $660. If purchased, annual repairs and maintenance are estimated to be $410 per year over the four-year useful life of the equipment. Alternatively, Gilroy can lease the equipment from a domestic supplier for $1,540 per year for four years, with no additional costs. Prepare a differential analysis dated December 11 to determine whether Gilroy should lease (Alternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a lease-or-buy decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner.) If an amount is zero, enter "0". Differential Analysis Lease Machine (Alt. 1) or Buy Machine (Alt. 2) December 11 Lease Machine(Alternative 1) Buy Machine(Alternative 2) Differential Effecton Income(Alternative 2) Revenues $0 $0 $0 Costs:…
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On March 17, Advanced Technologies purchased a patent related to laser surgery techniques. The purchase price of the patent is $1,250,000. The patent is expected to benefit the company for the next five years. The company had the following additional costs: $25,000 in legal fees associated with the purchase and filing of the patent, $40,000 to advertise its new laser surgery techniques, and $ 50,000 to train employees. None of these additional costs were included in the purchase price or paid to the seller. What is the recorded cost of the patent?
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Tullis Construction enters into a long-term fixed price contract to build an office tower for $10,600,000. In the first year of the contract Tullis incurs $3,000,000 of cost and the engineers determined that the remaining costs to complete the project are $5,000,000. Tullis billed $5,000,000 in year 1 and collected $3,100,000 by the end of the end of the year. How should Tullis report Construction in Progress and Billings on Construction in Progress at the end of year 1 on the balance sheet assuming the use of the completed - contract method? O A. asset of $2,000,000 O B. liability of $1,900,000 O C. asset of $1,900,000 O D. liability of $2,000,000
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Wildhorse Co. purchased equipment on January 1 at a list price of $155000, with credit terms 3/10, n/30. Payment was made within the discount period. Wildhorse paid $6500 sales tax on the equipment, and paid installation charges of $2100. Prior to installation, Wildhorse paid $3500 to pour a concrete slab on which to place the equipment. What is the total cost of the new equipment?

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