Santa Rosa recently purchased a new boat to help ship product overseas. The following information is related to that purchase: • Purchase price $4,500,000 • Cost to bring boat to production facility$25,000 • Yearly insurance cost $25,000 • Annual maintenance cost of$30,000 • Received 8% discount on sales price Determine the acquisition cost of the boat, and record the journal entry needed.

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Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

Solutions

Chapter
Section
FindFindarrow_forward

Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 11, Problem 9EA
Textbook Problem
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Santa Rosa recently purchased a new boat to help ship product overseas. The following information is related to that purchase:• Purchase price $4,500,000• Cost to bring boat to production facility$25,000• Yearly insurance cost $25,000• Annual maintenance cost of$30,000• Received 8% discount on sales priceDetermine the acquisition cost of the boat, and record the journal entry needed.

To determine

Introduction:

Journal entries record business transactions. These transactions have double effect on accounts such that total of all assets equate with liabilities and equities.

To calculate:

The acquisition cost of the new boat and to journalize the same.

Explanation of Solution

Calculation of acquisition cost of new boat by Company SR:

 Particulars Amount ($) Purchase Price 4,500,000 Add: Cost to Set-up Boat at Production Facility 25,000 Add: Yearly Insurance Cost 25,000 Add: Annual Maintenance Cost 30,000 Less: Discount Received ($4,500,000×8%) (360,000) Total Acquisition Cost of the Boat

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