During the current year, Sacrosanct Company purchased a second-hand machine at a price of P3,200,000. A cash payment of P500,000 was made and a two-year, noninterest bearing note was issued for the balance. Recent transactions involving similar machinery indicate that the used machine has a fair value of P2,400,000. A new machine would cost P4,000,000. The following costs were incurred during the year: 30,000 Cost of removing old machine that is replaced Cash proceeds from sale of the old machine replaced General overhaul and repairs to recondition machine prior to use Cost of spare parts to cover breakdowns Cost of installation Cost of testing machine prior to use Cost of hauling machine from vendor to entity premises Cost of repairing damage to machine caused when machine was dropped during installation 30,000 Repairs incurred during first year of operations Safety device added to the machine Cost of training workers to operate the machine 10,000 150,000 200,000 80,000 110,000 10,000 90,000 250,000 20,000 What total amount should be capitalized as cost of the second hand machine?

During the current year, Sacrosanct Company purchased a second-hand machine at a price of P3,200,000. A cash payment of P500,000 was made and a two-year, noninterest bearing note was issued for the balance. Recent transactions involving similar machinery indicate that the used machine has a fair value of P2,400,000. A new machine would cost P4,000,000. The following costs were incurred during the year: 30,000 Cost of removing old machine that is replaced Cash proceeds from sale of the old machine replaced General overhaul and repairs to recondition machine prior to use Cost of spare parts to cover breakdowns Cost of installation Cost of testing machine prior to use Cost of hauling machine from vendor to entity premises Cost of repairing damage to machine caused when machine was dropped during installation 30,000 Repairs incurred during first year of operations Safety device added to the machine Cost of training workers to operate the machine 10,000 150,000 200,000 80,000 110,000 10,000 90,000 250,000 20,000 What total amount should be capitalized as cost of the second hand machine?

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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