During 2022, MinMin Co. purchased a second-hand machine at a price of P3,200,000. A cash payment of P500,000 was made and a two-year non-interest bearing note was issued for the balance. The cash price equivalent for similar machineries was at P 2,400,000. A new machine would cost P4,000,000. The following costs were incurred during the year: Cost of removing old machine that was replaced Cash proceeds from the sale of the old machine replaced General overhaul and repairs to condition machine prior to use Cost of spare parts to cover breakdowns Cost of installation Cost of testing machine prior to use, net of 10,000 proceeds from sale of samples Cost of hauling machine from vendor to entity premises Cost of repairing damage to machine caused when machine was dropped during installation Repairs incurred during first year of operations Safety device added to the machine Cost of training workers to operate the machine P 30,000 10,000 150,000 200,000 80,000 100,000 10,000 30,000 90,000 250,000 20,000 Compute the amount to be capitalized as cost of the machine.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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During 2022, MinMin Co. purchased a second-hand machine at a price of P3,200,000. A cash payment of
P500,000 was made and a two-year non-interest bearing note was issued for the balance. The cash price
equivalent for similar machineries was at P 2,400,000. A new machine would cost P4,000,000. The following
costs were incurred during the year:
Cost of removing old machine that was replaced
Cash proceeds from the sale of the old machine
replaced
General overhaul and repairs to condition machine prior
to use
Cost of spare parts to cover breakdowns
Cost of installation
Cost of testing machine prior to use, net of 10,000
proceeds from sale of samples
Cost of hauling machine from vendor to entity premises
Cost of repairing damage to machine caused when
machine was dropped during installation
Repairs incurred during first year of operations
Safety device added to the machine
Cost of training workers to operate the machine
P 30,000
10,000
150,000
200,000
80,000
Compute the amount to be capitalized as cost of the machine.
100,000
10,000
30,000
90,000
250,000
20,000
Transcribed Image Text:During 2022, MinMin Co. purchased a second-hand machine at a price of P3,200,000. A cash payment of P500,000 was made and a two-year non-interest bearing note was issued for the balance. The cash price equivalent for similar machineries was at P 2,400,000. A new machine would cost P4,000,000. The following costs were incurred during the year: Cost of removing old machine that was replaced Cash proceeds from the sale of the old machine replaced General overhaul and repairs to condition machine prior to use Cost of spare parts to cover breakdowns Cost of installation Cost of testing machine prior to use, net of 10,000 proceeds from sale of samples Cost of hauling machine from vendor to entity premises Cost of repairing damage to machine caused when machine was dropped during installation Repairs incurred during first year of operations Safety device added to the machine Cost of training workers to operate the machine P 30,000 10,000 150,000 200,000 80,000 Compute the amount to be capitalized as cost of the machine. 100,000 10,000 30,000 90,000 250,000 20,000
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