On August 1, 2021, FAITH Inc purchased a new machine on a deferred payment basis. A down payment of P200,000 was made and 4 annual instalments of P300,000 each are to be made beginning on August 1, 2022. An interest rate of 6% reflects the time value of money for this type of loan agreement. Due to an employee strike, the company could not install the machine immediately, and thus incurred P30,000 of storage costs. Costs of installation (excluding the storage costs) amounted to P80,000. What is the capitalized cost of the machine? Round-off your final answer to the nearest peso.

On August 1, 2021, FAITH Inc purchased a new machine on a deferred payment basis. A down payment of P200,000 was made and 4 annual instalments of P300,000 each are to be made beginning on August 1, 2022. An interest rate of 6% reflects the time value of money for this type of loan agreement. Due to an employee strike, the company could not install the machine immediately, and thus incurred P30,000 of storage costs. Costs of installation (excluding the storage costs) amounted to P80,000. What is the capitalized cost of the machine? Round-off your final answer to the nearest peso.

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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