Worf Co. both purchases and constructs various equipment it uses in its operatio
ID: 2645406 • Letter: W
Question
Worf Co. both purchases and constructs various equipment it uses in its operations. The following items for two different types of equipment were recorded in random order during the calendar year 2014.
Compute the total cost for each of these two pieces of equipment.
Purchase Cash paid for equipment, including sales tax of $5,825 $122,325 Freight and insurance cost while in transit 2,330 Cost of moving equipment into place at factory 3,612 Wage cost for technicians to test equipment 4,660 Insurance premium paid during first year of operation on this equipment 1,748 Special plumbing fixtures required for new equipment 9,320 Repair cost incurred in first year of operations related to this equipment 1,515 Construction Material and purchased parts (gross cost $233,000; failed to take 1% cash discount) $233,000 Imputed interest on funds used during construction (stock financing) 16,310 Labor costs 221,350 Allocated overhead costs (fixed-$23,300; variable-$34,950) 58,250 Profit on self-construction 34,950 Cost of installing equipment 5126Explanation / Answer
Calculation of cost Purchase Particulars Amount Cash paid for equipment, including sales tax of $5,825 122325 Freight and insurance cost while in transit 2330 Cost of moving equipment into place at factory 3612 Wage cost for technicians to test equipment 4660 Insurance premium paid during first year of operation on this equipment 1748 Special plumbing fixtures required for new equipment 9320 Repair cost incurred in first year of operations related to this equipment NIL Total cost to be capitalised 143995 Repair cost is revenue exp hence not included Construction Material and purchased parts 233000 Labor Costs 221350 Allocated overheads 58250 Imputed Interest NIL Cost of installing equipment 5126 Profit on self construction NIL Total cost to be capitalised 517726 Imputed interest is not a actual cost
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