Determining the Cost of an AssetKeystone, Inc., replaced its truck-and-dolley system of moving inventory around its plant with a computer-controlled conveyor system. The costs associated with this equipment replacement were as follows:Purchase price of conveyor system$800,000Book value of truck-and-dolley system20,000Installation cost of new conveyor system55,000 The truck-and-dolley system was sold for scrap for $40,000. What value should be capitalized to the balance sheet of Keystone, Inc., as the cost basis of the new conveyor system? $Answer

Fixed assets means the assets which is used for many years in business and depreciated over the…

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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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Determining the Cost of an Asset

Keystone, Inc., replaced its truck-and-dolley system of moving inventory around its plant with a computer-controlled conveyor system. The costs associated with this equipment replacement were as follows:

Purchase price of conveyor system	$800,000
Book value of truck-and-dolley system	20,000
Installation cost of new conveyor system	55,000

The truck-and-dolley system was sold for scrap for $40,000. What value should be capitalized to the balance sheet of Keystone, Inc., as the cost basis of the new conveyor system?

$Answer

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