Costs of Acquiring Fixed AssetsMelinda Stoffers owns and operates ABC Print Co. During February, ABC incurred the following costs in acquiring two printing presses. One printing press was new, and the other was purchased from a business that recently filed for bankruptcy.a. Indicate which costs incurred in acquiring the new printing press (1-6 below) should be debited to the asset account. ItemDebited to asset account1.Fee paid to factory representative for installation 2.Freight 3.Insurance while in transit 4.New parts to replace those damaged in unloading 5.Sales tax on purchase price 6.Special foundation b. Indicate which costs incurred in acquiring the used printing press (7-12 below) should be debited to the asset account. ItemDebited to asset account7.Fees paid to attorney to review purchase agreement 8.Freight 9.Installation 10.Repair of damage incurred in reconditioning the press 11.Replacement of worn-out parts 12.Vandalism repairs during installation

An asset can be referred to as a tangible or non-tangible item, reported in statement of financial position, which will provide economic benefits to the entity in future. The amount incurred for the generation or acquisition of an asset is capitalized.New printing press: Item Debited to asset account 1. Fee paid to factory representative for installation Yes 2. Freight Yes 3. Insurance while in transit Yes 4. New parts to replace those damaged in unloading No 5. Sales tax on purchase price Yes 6. Special foundation Yes The amount incurred on the replacement of parts damaged during unloading will not be capitalized rather, they will be reported on the profit or loss account. b. Second hand printing press: Item Debited to asset account 7. Fees paid to attorney to review purchase agreement Yes 8. Freight Yes 9. Installation Yes 10. Repair of damage incurred in reconditioning the press No 11. Replacement of worn-out parts Yes 12. Vandalism repairs during installation No The repairs and vandalism repairs will be treated as non-capital expenditure as they do not increase the value of the asset.

Answered: Costs of Acquiring Fixed Assets…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Costs of Acquiring Fixed Assets

Melinda Stoffers owns and operates ABC Print Co. During February, ABC incurred the following costs in acquiring two printing presses. One printing press was new, and the other was purchased from a business that recently filed for bankruptcy.

a. Indicate which costs incurred in acquiring the new printing press (1-6 below) should be debited to the asset account.

	Item	Debited to asset account
1.	Fee paid to factory representative for installation
2.	Freight
3.	Insurance while in transit
4.	New parts to replace those damaged in unloading
5.	Sales tax on purchase price
6.	Special foundation

b. Indicate which costs incurred in acquiring the used printing press (7-12 below) should be debited to the asset account.

	Item	Debited to asset account
7.	Fees paid to attorney to review purchase agreement
8.	Freight
9.	Installation
10.	Repair of damage incurred in reconditioning the press
11.	Replacement of worn-out parts
12.	Vandalism repairs during installation

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