PROBLEM 3: CALCULATE COST OF THE ASSET AND EXPENDITURE OF DEPRECIATION Obiective

Question

PROBLEM 3: CALCULATE COST OF THE ASSET AND EXPENDITURE OF DEPRECIATION Obiective: 7 1. Determine what sosts of the asset can be capitalized. 2. Determine the depreciation expense under the straight-line method, Empresas Agueybaná decides to buy new macbinery for its store in Fajardo. Aguevbaná iocurred the following costs related to the machinery acquired ·Cost of machinery: $ 80,000 Sales tax (sales tax): 4,000 Shipping sosts (FOB Shipping sosts) 2,500 Installation costs 3,500 Extended warranty (2 years) 400 Tbe machinery has a useful life of 10 years, with no residual value. Required 1. Determine the cost of machinery or Agueybaná

Explanation / Answer

1) Determine cost of machine :

Note Extended warranty should not be capitalized.

Cost of machine 80000 Add: Sales tax 4000 Add: Shipping cost 2500 Add : Installation cost 3500 Total cost of machine 90000

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