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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Cost of a Fixed Asset

Colson Photography Service purchased a new digital imaging machine on April 15 for $11,200.

During installation Colson incurred and paid in cash the following costs:

Chapter 7, Problem 44E, Cost of a Fixed Asset Colson Photography Service purchased a new digital imaging machine on April 15

Colson also paid $160 to replace a bracket on the digital imager that was damaged when one of Colson’s employees dropped a box on it while it was being installed.

Required:

1. Determine the cost of the digital imaging machine.

2. CONCEPTUAL CONNECTION Explain why you included or excluded the $160 bracket replacement cost.

To determine

Concept introduction:

Cost:

The cost is defined as any amount incurred by the company to acquire the asset and get the asset to set in place and ready for use. Any expenditures that are not included as part of the cost of the equipment are expenses and the other costs that are included are capitalized.

Requirement 1:

Determine the cost of digital imaging machine.

Explanation

The cost of an equipment generally includes the cost of the machine, installation costs, transportation, insurance during transportation and trial run cost and sales taxes. Now the cost of the machine includes the purchase price for the machine, rental of d...

To determine

Concept introduction:

Cost:

The cost is defined as any amount incurred by the company to acquire the asset and get the asset to set in place and ready for use. Any expenditures that are not included as part of the cost of the equipment are expenses and the other costs that are included are capitalized.

Requirement 2:

To explain why the $160 bracket replacement cost is included or excluded in the cost of the machine.

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