Loren Company uses many kinds of machines in operations. The entity acquires some machines from others and constructs some machines itself. The following information pertains to a machine constructed by Loren: Cost of material to construct 700,000 Labor cost 430,000 Allocated overhead costs – electricity, factory space, etc. Allocated interest cost of financing machine Cost of installation 220,000 100,000 120,000 Insurance for one year Profit saved by self-construction Safety inspection cost prior to use 20,000 150,000 40,000 What total amount should 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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Loren Company uses many kinds of machines in operations. The entity acquires some machines from
others and constructs some machines itself. The following information pertains to a machine constructed
by Loren:
Cost of material to construct
700,000
Labor cost
430,000
Allocated overhead costs – electricity, factory space, etc.
Allocated interest cost of financing machine
Cost of installation
220,000
100,000
120,000
Insurance for one year
Profit saved by self-construction
Safety inspection cost prior to use
20,000
150,000
40,000
What total amount should be capitalized as cost of the machine?
Transcribed Image Text:Loren Company uses many kinds of machines in operations. The entity acquires some machines from others and constructs some machines itself. The following information pertains to a machine constructed by Loren: Cost of material to construct 700,000 Labor cost 430,000 Allocated overhead costs – electricity, factory space, etc. Allocated interest cost of financing machine Cost of installation 220,000 100,000 120,000 Insurance for one year Profit saved by self-construction Safety inspection cost prior to use 20,000 150,000 40,000 What total amount should be capitalized as cost of the machine?
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