On 1 May 2020, Ron Trading purchased a new machine. The following payments relate to the machine. List price $21,500 Purchase discount $2,000 Transportation cost $300 Repair of damage parts incurred in transporting the machine $1,000 Fees paid to test the machine before use $500 Fees paid to the installer to install the machine $800 Machine operator’s salary for the first month of operation $3,000 Maintenance costs for the first month of operation $300 (i) Identify and compute the cost of the machine to be recognised. Explain your reasoning. (ii) Journalise the transactions. Assume the above payments are paid in cash.
On 1 May 2020, Ron Trading purchased a new machine. The following payments relate to the machine. List price $21,500 Purchase discount $2,000 Transportation cost $300 Repair of damage parts incurred in transporting the machine $1,000 Fees paid to test the machine before use $500 Fees paid to the installer to install the machine $800 Machine operator’s salary for the first month of operation $3,000 Maintenance costs for the first month of operation $300 (i) Identify and compute the cost of the machine to be recognised. Explain your reasoning. (ii) Journalise the transactions. Assume the above payments are paid in cash.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter7: Operating Assets
Section: Chapter Questions
Problem 43E
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Question
On 1 May 2020, Ron Trading purchased a new machine. The following payments
relate to the machine.
List price $21,500
Purchase discount $2,000
Transportation cost $300
Repair of damage parts incurred in transporting the machine $1,000
Fees paid to test the machine before use $500
Fees paid to the installer to install the machine $800
Machine operator’s salary for the first month of operation $3,000
Maintenance costs for the first month of operation $300
(i) Identify and compute the cost of the machine to be recognised. Explain
your reasoning.
(ii) Journalise the transactions. Assume the above payments are paid in cash.
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