On 1 May 2020, Ron Trading purchased a new machine. The following payments relate to the machine. List price $21,500 Purchase discount $2,000 Transportation cost $300 Repair of damage parts incurred in transporting the machine $1,000 Fees paid to test the machine before use $500 Fees paid to the installer to install the machine $800 Machine operator’s salary for the first month of operation $3,000 Maintenance costs for the first month of operation $300 (i) Identify and compute the cost of the machine to be recognised. Explain your reasoning. (ii) Journalise the transactions. Assume the above payments are paid in cash.
On 1 May 2020, Ron Trading purchased a new machine. The following payments relate to the machine. List price $21,500 Purchase discount $2,000 Transportation cost $300 Repair of damage parts incurred in transporting the machine $1,000 Fees paid to test the machine before use $500 Fees paid to the installer to install the machine $800 Machine operator’s salary for the first month of operation $3,000 Maintenance costs for the first month of operation $300 (i) Identify and compute the cost of the machine to be recognised. Explain your reasoning. (ii) Journalise the transactions. Assume the above payments are paid in cash.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On 1 May 2020, Ron Trading purchased a new machine. The following payments
relate to the machine.
List price $21,500
Purchase discount $2,000
Transportation cost $300
Repair of damage parts incurred in transporting the machine $1,000
Fees paid to test the machine before use $500
Fees paid to the installer to install the machine $800
Machine operator’s salary for the first month of operation $3,000
Maintenance costs for the first month of operation $300
(i) Identify and compute the cost of the machine to be recognised. Explain
your reasoning.
(ii) Journalise the transactions. Assume the above payments are paid in cash.
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