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.

1. a. Determine the cost of the machine and any expenses incurred during the acquisition.
2. 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.