Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Chapter 11, Problem 11.1E
Determining Acquisition Cost. St Charles Flooring Company recently purchased a new tile-cutting machine with an invoice price of $215,500. The cost of delivery was $2,000, and installation amounted to $3,550. To test the machine, St. Charles cut 100 tiles that cost $4.50 each. The testing process lasted 2 hours and involved three employees who earn $20 per hour. Management removed the employees from their regular production shifts to engage in the testing. The company held training sessions costing $6,000 for all employees after installing the machine.
- a. Determine the cost of the machine and any expenses incurred during the acquisition.
- b. Prepare the
journal entries necessary to record the amount of costs capitalized and the costs charged to expense related to the acquisition. Assume that all expenditures were made m cash.
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Chapter 11 Solutions
Intermediate Accounting
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