Worf Co. both purchases and constructs various equipment it uses in its operations. The following items for two different types of equipment were recorded in random order during the calendar year 2020. Purchase Cash paid for equipment, including sales tax of $5,000 $105,000 Freight and insurance cost while in transit 2,000 Cost of moving equipment into place at factory 3,100 Wage cost for technicians to test equipment 4,000 Insurance premium paid during first year of operation on this equipment 1,500 Special plumbing fixtures required for new equipment 8,000 Repair cost incurred in first year of operations related to this equipment 1,300 Construction Material and purchased parts (gross cost $200,000; failed to take 2% cash discount) $200,000 Imputed interest on funds used during construction (stock financing) 14,000 Labor costs 190,000 Allocated overhead costs (fixed—$20,000; variable—$30,000) 50,000 Profit on self-construction 30,000 Cost of installing equipment 4,400 Instructions Compute the total cost for each of these two pieces of equipment. If an item is not capitalized as a cost of the equipment, indicate how it should be reported.
Worf Co. both purchases and constructs various equipment it uses in its operations. The following items for two different types of equipment were recorded in random order during the calendar year 2020. Purchase Cash paid for equipment, including sales tax of $5,000 $105,000 Freight and insurance cost while in transit 2,000 Cost of moving equipment into place at factory 3,100 Wage cost for technicians to test equipment 4,000 Insurance premium paid during first year of operation on this equipment 1,500 Special plumbing fixtures required for new equipment 8,000 Repair cost incurred in first year of operations related to this equipment 1,300 Construction Material and purchased parts (gross cost $200,000; failed to take 2% cash discount) $200,000 Imputed interest on funds used during construction (stock financing) 14,000 Labor costs 190,000 Allocated overhead costs (fixed—$20,000; variable—$30,000) 50,000 Profit on self-construction 30,000 Cost of installing equipment 4,400 Instructions Compute the total cost for each of these two pieces of equipment. If an item is not capitalized as a cost of the equipment, indicate how it should be reported.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Worf Co. both purchases and constructs various equipment it uses in its operations. The following items for two different types of equipment were recorded in random order during the calendar year 2020.
| Purchase | |
| Cash paid for equipment, including sales tax of $5,000 |
$105,000
|
| Freight and insurance cost while in transit |
2,000
|
| Cost of moving equipment into place at factory |
3,100
|
| Wage cost for technicians to test equipment |
4,000
|
| Insurance premium paid during first year of operation on this equipment |
1,500
|
| Special plumbing fixtures required for new equipment |
8,000
|
| Repair cost incurred in first year of operations related to this equipment |
1,300
|
| Construction | |
| Material and purchased parts (gross cost $200,000; failed to take 2% cash discount) |
$200,000
|
| Imputed interest on funds used during construction (stock financing) |
14,000
|
| Labor costs |
190,000
|
| Allocated |
50,000
|
| Profit on self-construction |
30,000
|
| Cost of installing equipment |
4,400
|
Instructions
Compute the total cost for each of these two pieces of equipment. If an item is not capitalized as a cost of the equipment, indicate how it should be reported.
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