Southwest Milling Company purchased a front-end loader to move stacks of lumber. The loader had a list price of $118,810. The seller agreed to allow a 6.00 percent discount because Southwest Milling paid cash. Delivery terms were FOB shipping point. Freight cost amounted to $2,840. Southwest Milling had to hire a specialist to calibrate the loader. The specialist’s fee was $800. The loader operator is paid an annual salary of $29,210. The cost of the company’s theft insurance policy increased by $2,180 per year as a result of acquiring the loader. The loader had a four-year useful life and an expected salvage value of $13,500. Required a. Determine the amount to be capitalized in an asset account for the purchase of the loader. b. Record the purchase in general journal format. Required A Required B Complete this question by entering your answers in the tabs below.
Southwest Milling Company purchased a front-end loader to move stacks of lumber. The loader had a list price of $118,810. The seller
agreed to allow a 6.00 percent discount because Southwest Milling paid cash. Delivery terms were FOB shipping point. Freight cost
amounted to $2,840. Southwest Milling had to hire a specialist to calibrate the loader. The specialist’s fee was $800. The loader operator
is paid an annual salary of $29,210. The cost of the company’s theft insurance policy increased by $2,180 per year as a result of
acquiring the loader. The loader had a four-year useful life and an expected salvage value of $13,500.
Required
a. Determine the amount to be capitalized in an asset account for the purchase of the loader.
b. Record the purchase in general journal format.
Required A Required B
Complete this question by entering your answers in the tabs below.
Capitalization of cost means the amount of expenses or costs which should be added in the cost of asset rather than expensed in income statement.
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