8) Queue, Incorporated incurred the following expenditures for the purchase and use of a machine, which was placed into service on January 1, 2011:
Expenditure
Amount
invoice price of the machine
$144,000
transportation costs
23,000
inspection, moving and handling
6,500
installation and testing
12,300
power and other operating costs for using the machine during the year
43,000
Required:
1. Determine the total costs that should be capitalized into the machine account. What is the total? Explain how you decided which costs to capitalize.
2. Determine the total operating expenses associated with using the machine for the year ended December 31, 2011. Assume the machine has an estimated 5-year useful life and an $8,000 salvage value. Explain how you decided which costs to expense.
9) Able Baker Company incurred the following expenditures for the purchase and use of a machine for the company’s factory in Puerto Rico.
Required:Put an X in the appropriate box to indicate which expenditures should be capitalized and which should be expensed:
Capitalize
Expense
$60,000 invoice price of the machine
$3,000 transportation costs for the machine
$1,400 for inspection of the machine
$1,000 for moving and handling the machine
$3,500 for installation of the machine
$2,200 for testing the machine
$12,000 in power costs for the year to operate the machine
$2,000 for ordinary repairs and maintenance on the
machine for the year
$4,000 for an overhaul to make the machine run more
efficiently
Answer: Expenditure
X
Diff: 2
Skill: Analytic skills, Dynamics of the global economy
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