On 1-March-2010, Alpha Pharmaceuticals Ltd. purchased 10 machines for manufacturing tablets. The price of each machine is $150,000. The transportation and installation cost is 1% and 2.5% of the price respectively for each machine. The company also had to bear the cost of test runs for each machine, which were $1,500. The approximate repair and maintenance expense for each machine is $4,000 per year. The company paid 25% of price in cash and signed a 6 month, Notes Payable (N/P) for the
Q # 1: On 1-March-2010, Alpha Pharmaceuticals Ltd. purchased 10 machines for manufacturing
tablets. The price of each machine is $150,000. The transportation and installation cost is 1% and
2.5% of the price respectively for each machine. The company also had to bear the cost of test
runs for each machine, which were $1,500. The approximate repair and maintenance expense for
each machine is $4,000 per year. The company paid 25% of price in cash and signed a 6 month,
Notes Payable (N/P) for the remaining balance. The N/P bears interest expense for the company
at 5% per annum. Each machine is useful for 5 years and experts estimate that each machine can
be sold at the end of its useful life for 10% of its purchase price.
During its useful life, the machine will produce 7,500,000 tablets. Following table shows number
of tablets produced in each year. Please note that the company’s fiscal year ends on 30th June.
Year Units Produced
1 2,500,000
2 1,700,000
3 1,400,000
4 1,200,000
5 700,000
Total 7,500,000
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