On January 2, 2021, Athol Company bought a machine for use in operations. The machine has an estimated useful life of eight years and an estimated residual value of $1,600. The company provided the following information: a. Invoice price of the machine, $71,600. b. Freight paid by the vendor per sales agreement, $900. c. Installation costs, $2,200 cash. d. Cost of cleaning up the supplies, boxes, and other garbage that remained after the installation of the machine, $140 cash. e. Payment of the machine's price was made as follows: January 2: • Issued 1,150 common shares of Athol Company at $4 per share. • Signed a $39,000 note payable due April 16, 2018, plus 8 percent interest. • Balance of the invoice price to be paid in cash. The invoice allows for a 2 percent cash discount if the cash payment is made by January 11. January 15: Paid the balance of the invoice price in cash. April 16: Paid the note payable and interest in cash. f. On June 30, 2023, the company completed the replacement of a major part of the machine that cost $12,750. This expenditure is expected to reduce the machine's operating costs, increase its estimated useful life by two years, and decrease its estimated residual value to $1,100. g. Assume that on October 1, 2028, the company decided to replace the machine with a newer, more efficient model. It then sold the machine to Sako Ltd. on that date for $23,600 cash. Required: 1. Compute the acquisition cost of the machine. Acquisition cost $ 73,408
On January 2, 2021, Athol Company bought a machine for use in operations. The machine has an estimated useful life of eight years and an estimated residual value of $1,600. The company provided the following information: a. Invoice price of the machine, $71,600. b. Freight paid by the vendor per sales agreement, $900. c. Installation costs, $2,200 cash. d. Cost of cleaning up the supplies, boxes, and other garbage that remained after the installation of the machine, $140 cash. e. Payment of the machine's price was made as follows: January 2: • Issued 1,150 common shares of Athol Company at $4 per share. • Signed a $39,000 note payable due April 16, 2018, plus 8 percent interest. • Balance of the invoice price to be paid in cash. The invoice allows for a 2 percent cash discount if the cash payment is made by January 11. January 15: Paid the balance of the invoice price in cash. April 16: Paid the note payable and interest in cash. f. On June 30, 2023, the company completed the replacement of a major part of the machine that cost $12,750. This expenditure is expected to reduce the machine's operating costs, increase its estimated useful life by two years, and decrease its estimated residual value to $1,100. g. Assume that on October 1, 2028, the company decided to replace the machine with a newer, more efficient model. It then sold the machine to Sako Ltd. on that date for $23,600 cash. Required: 1. Compute the acquisition cost of the machine. Acquisition cost $ 73,408
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 2, 2021, Athol Company bought a machine for use in operations. The machine has an estimated useful life of eight years
and an estimated residual value of $1,600. The company provided the following information:
a. Invoice price of the machine, $71,600.
b. Freight paid by the vendor per sales agreement, $900.
c. Installation costs, $2,200 cash.
d. Cost of cleaning up the supplies, boxes, and other garbage that remained after the installation of the machine, $140 cash.
e. Payment of the machine's price was made as follows:
January 2:
• Issued 1,150 common shares of Athol Company at $4 per share.
• Signed a $39,000 note payable due April 16, 2018, plus 8 percent interest.
• Balance of the invoice price to be paid in cash. The invoice allows for a 2 percent cash discount if the cash payment is made by
January 11.
January 15: Paid the balance of the invoice price in cash.
April 16: Paid the note payable and interest in cash.
f. On June 30, 2023, the company completed the replacement of a major part of the machine that cost $12,750. This expenditure is
expected to reduce the machine's operating costs, increase its estimated useful life by two years, and decrease its estimated
residual value to $1,100.
g. Assume that on October 1, 2028, the company decided to replace the machine with a newer, more efficient model. It then sold the
machine to Sako Ltd. on that date for $23,600 cash.
Required:
1. Compute the acquisition cost of the machine.
Acquisition cost
$ 73,408
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