Warr22e_IM_TM_Ch10 - Transparency Master 10-1 COST TO...

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Transparency Master 10-1 COST TO ACQUIRE FIXED ASSETS Advanced Technology, a computer manufacturer, pur- chased a machine that applies computer chips to cir- cuit boards, using a process known as Surface Mount Technology (SMT). The costs associated with acquir- ing the SMT machine are listed below. Where should each cost be recorded in the accounting records? Purchase price. .......................................... $150,000 Transportation. .......................................... 1,200 Engineer's fee to set up and adjust the machine to required specifications. ........................ 2,000 Electrician's fee to install a new power outlet required by the SMT machine. .................................. 800 Repairs made to wall as a result of damage during installation of the new power outlet. ....................... 500 Cost of chips and circuit board used to test the new machine before it is used in production. ............ 300 Cost of 3-year service contract requiring the manufacturer of the SMT machine to make any repairs needed, at no cost. ................... 3,000
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Transparency Master 10-2 COST TO ACQUIRE FIXED ASSETS Solution Advanced Technology, a computer manufacturer, purchased a ma- chine that applies computer chips to circuit boards, using a process known as Surface Mount Technology (SMT). The costs associated with acquiring the SMT machine are listed below. Where should each cost be recorded in the accounting records? Recorded in Purchase price. ................................... $150,000 Equipment Transportation. ................................... 1,200 Equipment Engineer's fee to set up and adjust the machine to required specifications. ................. 2,000 Equipment Electrician's fee to install a new power outlet required by the SMT machine. ..................... 800 Equipment Repairs made to wall as a result of damage during installation of the new power outlet. ................................... 500 Repair Expense Cost of chips and circuit boards used to test the new machine before it is used in production. ........................ 300 Equipment Cost of 3-year service contract requiring the manufacturer of the SMT machine to make any repairs needed, at no cost. ........................................... 3,000 Prepaid Expense
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Transparency Master 10-3 COST OF LAND ACQUIRED AS A BUILDING SITE When land is acquired as a building site, all costs to purchase the land and prepare it for the new building are considered a cost of the land. Indicate whether the following costs should be recorded in the land, building, or land improvements account. Cost Explanation $200,000 Purchase price paid for land and old warehouse build- ing. The warehouse building will be torn down, and a new manufacturing plant will be erected in its place. The land has an appraised value of $125,000; the warehouse is appraised at $75,000. 5,000
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This note was uploaded on 04/20/2010 for the course BUSINESS Accounting taught by Professor Ebiohuche during the Spring '10 term at DeVry Manhattan.

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Warr22e_IM_TM_Ch10 - Transparency Master 10-1 COST TO...

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