Question wi East Carolina Lumber Co. purchased an electronic saw to cut various

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Question wi East Carolina Lumber Co. purchased an electronic saw to cut various types and sizes of logs. The saw had a list price of S00.000 The seller agreed to allow a 5% discount because East Carolina paid cash. Delivery terms were FOB shipping point. Freight cost amounted to $1,500. Modifications to the sawmill to allow for installation of the new saw cost $2.200. East Carolina had to hire an individual to operate the saw. The operator was trained to run the saw for a one-time training fee of $900. In addition, the operator spent the first half month of employment working on installation of the saw. The operator was paid an annual salary of 4,000. The cost of the company's theft insurance policy increased by $3,100 per year as a result of the acquisition of the saw. The saw had a four-year useful life and an expected salvage value of S6,500. Required Determine the amount to be capitalized in an asset account for the purchase of the saw. You must show your work for complete credit. Total Acquisition Cost: Question #2 When does Goodwill occur? How is Goodwill calculated? How is Goodwill classified in the financial statements?

Explanation / Answer

East Carolina Lumber Co. Amount in $ List price of Electrical Saw 900000 Less : Discount@5% 45000 Net 855000 Add : Freight 1500 Add : Modification while installation 2200 Add : Training expenses 900 Add : Installation salary =24000*0.5/12 1000 Total Acquisition Cost 860600

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