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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Costs of acquiring fixed assets

Melinda Stoffers owns and operates ABC Print Co. During February, ABC incurred the following costs in acquiring two printing presses. One printing press was new, and the other was purchased from a business that recently filed for bankruptcy.

Costs related to new printing press:

  1. 1. Fee paid to factory representative for installation
  2. 2. Freight
  3. 3. Insurance while in transit
  4. 4. New parts to replace those damaged in unloading
  5. 5. Sales tax on purchase price
  6. 6. Special foundation

Costs related to used printing press:

7.    Fees paid to attorney to review purchase agreement

8.    Freight

9.    Installation

10.    Repair of damage incurred in reconditioning the press

11.    Replacement of worn-out parts

12.    Vandalism repairs during installation

  1. a. Indicate which costs incurred in acquiring the new printing press should be debited to the asset account.
  2. b. Indicate which costs incurred in acquiring the used printing press should be debited to the asset account.

a.

To determine

Fixed Assets: Fixed assets refer to the long-term assets having a useful life of more than a year which is, acquired by a company to be used in its business activities, for generating revenue.

To Indicate: the costs that are incurred in acquiring the new printing press should be debited to the asset account.

Explanation

Indicate the costs that are incurred in acquiring the new printing press should be debited to the asset account.

  • Fee paid to factory representative for installation
  • Freight
  • Insurance while in transit
  • Sales tax on purchase price
  • Special foundation

The cost of acquiring the fixed assets ref...

b.

To determine

To Indicate: the costs that are incurred in acquiring the used printing press should be debited to the asset account.

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