Textbook Problem

A Cost of a Fixed Asset

Mist City Car Wash purchased a new brushless car-washing machine for one of its bays. The machine cost $41,700. Mist City borrowed the purchase price from its bank on a 1-year, 8% note payable. Mist City paid $975 to have the machine transported to its place of business and an additional $200 in shipping insurance. Mist City incurred the following costs as a part of the installation:

During the testing process, one of the motors became defective when soap and water entered the motor because its cover had not been installed properly by Mist City’s employees. The motor was replaced at a cost of $640.

Required:

1. Compute the cost of the car-washing machine.

2. CONCEPTUAL CONNECTION Explain why any costs were excluded from the cost of the machine.