Answered: How much should be capitalized as cost…

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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On August 1, 2014, Lleiram Corporation purchased a new machine on a deferred payment basis. A down payment of P200,000 was made and 4 annual installments of P600,000 each are to be made beginning on September 1, 2014. Terms of the contract are not normal in the industry where the same types of assets are being traded. Due to an employee strike, Flight could not install the machine immediately, thus, incurred P3,000 of storage cost. Cost of installation (excluding the storage cost) amounted to P20,000. The cash price of the machine was P2,300,000. How much should be capitalized as cost of the machine? a. 2,300,000 c. 2,323,000 b. 2,320,000 d. 2,600,000

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