Question

On August 1, 2017, Mendez Corporation purchased a new machine on a deferred payment basis. A down payment of $4,000 was made and 4 annual installments of $24,000 each are to be made beginning on September 1, 2017. The cash equivalent price of the machine was $92,000. Due to an employee strike, Mendez could not install the machine immediately, and thus incurred $1,200 of storage costs. Costs of installation (excluding the storage costs) amounted to $3,200. The amount to be capitalized as the cost of the machine is

$92,000.

$95,200.

$96,400.

$104,000.

Answer 1

cost of the machine to be capitalized = $95,200

Step-by-step explanation:

given data

down payment = $4,000

time = 4

installments = $24,000

cash equivalent price = $92,000

storage costs = $1,200

Costs of installation = $3,200

to find out

he amount to be capitalized as the cost of the machine is

solution

we know here that cost of the machine to be capitalized here is express as

cost of the machine to be capitalized = Cash equivalent price of the machine + cost of installation ...........................1

put here value we get

cost of the machine to be capitalized = $9200 + 3200

cost of the machine to be capitalized = $95,200

so correct option is $95,200