Vermont Company acquired a machine at the beginning of the current year.Cash paid for machine, including VAT of P96,000P896,000Cost of transporting machine30,000Labor cost of installation by expert fitter50,000Labor cost of testing machine40,000Insurance cost for the current year15,000Cost of training for personnel who will use the machine25,000Cost of safety rails and platform surrounding machine60,000Cost of water device to keep machine cool80,000Cost of adjustment to machine to make it operate more efficiently75,000Estimated dismantling cost to be incurred as required by contract65,000 What total amount should be capitalized as cost of the machine?1,231,0001,200,0001,135,0001,150,000

Original price is the whole charge related to the acquisition of an asset. The authentic price of an…

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EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section9.A: Depreciation

Problem 5P

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Vermont Company acquired a machine at the beginning of the current year.

Cash paid for machine, including VAT of P96,000	P896,000
Cost of transporting machine	30,000
Labor cost of installation by expert fitter	50,000
Labor cost of testing machine	40,000
Insurance cost for the current year	15,000
Cost of training for personnel who will use the machine	25,000
Cost of safety rails and platform surrounding machine	60,000
Cost of water device to keep machine cool	80,000
Cost of adjustment to machine to make it operate more efficiently	75,000
Estimated dismantling cost to be incurred as required by contract	65,000

What total amount should be capitalized as cost of the machine?

1,231,000
1,200,000
1,135,000
1,150,000

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