Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 2, Problem 5QE
To determine
Identify the accounting treatment for the amount's that is not included in acquisition cost.
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Abby Corporation acquired a new processing machine. Details of the acquisition are as follows: Invoice cost, terms, 5% discount if payment is made in 30 days. The company did pay within the discount period, P300,000, Cost of transporting the machine to the corporation's factory, P5,000. Cost of installation (which includes additional P2,000 incurred due to negligence of the workers), P11,000. The corporation's chief engineer spent one-fourth of his time during trial runs of the new machine, his monthly salary is P22,000. The company paid P1,000 for removing the old machine. (The old machine was sold for less than its book value.) At what amount should Abelard Corporation capitalize the new processing machine?
Abby Corporation acquired a new processing machine. Details of the acquisition are as follows: Invoice cost, terms, 5% discount if payment is made in 30 days. The company did pay within the discount period, P300,000, Cost of transporting the machine to the corporation's factory, P5,000. Cost of installation (which includes additional P2,000 incurred due to negligence of the workers), P11,000. The corporation's chief engineer spent one-fourth of his time during trial runs of the new machine, his monthly salary is P22,000. The company paid P1,000 for removing the old machine. (The old machine was sold for less than its book value.) At what amount should Abby Corporation capitalize the new processing machine?
Ebasan Compary acquired a new machine with an invoice cost of P1,600,000, Ebasan incurred transportation cost P50,000 and installation cost P140,000. The terms of the acquisition include a 5% discount if payment is made in 10 days. The entity paid beyond the discount period. The entity's chief engineer with monthly salary of P60,000 spent two-thirds of his time during trial run of the new machine. The entity requested an allowance from the supplier because the machine proved to be of less than standard performance capability.
The supplier granted a cash allowance of P100,000. The cost of removing on aid machine before the new machine was installed amounted to P10,000. The operator of the old machine who was laid off due to the acquisition of the new machine was paid a gratuity of P30,000. What amount should Ebasan record as cost of the new machine?
Chapter 2 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
Ch. 2 - Prob. 1QECh. 2 - Asset Valuation and Income Recognition. Asset...Ch. 2 - Trade-Offs among Acceptable Accounting...Ch. 2 - Income Flows versus Cash Flows. The text states,...Ch. 2 - Prob. 5QECh. 2 - Prob. 6QECh. 2 - Prob. 7QECh. 2 - Prob. 8QECh. 2 - Computation of Income Tax Expense. A firms income...Ch. 2 - Computation of Income Tax Expense. A firms income...
Ch. 2 - Costs to Be Included in Historical Cost Valuation....Ch. 2 - Effect of Valuation Method for Nonmonetary Asset...Ch. 2 - Prob. 13PCCh. 2 - Prob. 14PCCh. 2 - Prob. 15PCCh. 2 - Deferred Tax Assets. Components of the deferred...Ch. 2 - Interpreting Income Tax Disclosures. The financial...Ch. 2 - Interpreting Income Tax Disclosures. Prepaid Legal...Ch. 2 - Interpreting Income Tax Disclosures. The financial...Ch. 2 - Analyzing Transactions. Using the analytical...Ch. 2 - Prob. 21PCCh. 2 - Starbucks The financial statements of Starbucks...Ch. 2 - Prob. 1BICCh. 2 - Prob. 1CICCh. 2 - Prob. 1DICCh. 2 - Prob. 1EICCh. 2 - Prob. 1FICCh. 2 - Starbucks The financial statements of Starbucks...
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- Falther Inc. acquired a new processing machine: Invoice cost P1,800,000 Transportation cost 50,000 Installation cost 120,000 The purchase agreement stipulated that if payment is made within 10 days, the entity will receive a 5% discount. However, the entity paid after the discount time had expired. The new entity's main engineer spent two-thirds of his time on the new machine's trial run. The remuneration is P90,000 per month. The company requested for an allowance from the supplier since the machine's performance was below par. A cash allowance of P100,000 was issued by the supplier. The cost of uninstalling the old machine before installing the new unit was P10,000. 1. What amount of should be recorded as cost of the new machine?arrow_forwardteele Corp. purchases equipment for $25,000. Regarding the purchase, Steele recorded the following transactions: • Paid shipping of $1,000• Paid installation fees of $2,000• Pays annual maintenance cost of $200• Received a 5% discount on $25,000 sales price Determine the acquisition cost of the equipment.arrow_forwardSolo Company purchased a new piece of equipment with a list price of $175,000 and subject to a 5 percent discount if paid within 45 days. H. Solo paid within the discount period. The company also paid $1,500 to obtain title to the equipment and $600 as the license fee for the first year of operation. It paid $2,500 to level the area in which the equipment would be located and $12,500 to relocate other equipment that would have interfered with the proper operation of the new equipment. H. Solo paid $400 for property and liability insurance for the first year of operation. What is the acquisition cost of this equipment that H. Solo should record in its accounting records?arrow_forward
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