Question

Anchor Company purchased a manufacturing machine with a list price of $87,000 and received a 2% cash discount on the purchase. The machine was delivered under terms Free On Board shipping point, and freight costs amounted to $2,600. Anchor paid $3,600 to have the machine installed and tested. Insurance costs to protect the asset from fire and theft amounted to $4,600 for the first year of operations. Based on this information, the amount of cost recorded in the asset account would be:

Answer 1

The amount of cost recorded in the asset account would be $96,060.

Step-by-step explanation:

To determine the cost recorded in the asset account, we need to consider the purchase price, cash discount, freight costs, installation and testing costs, and insurance costs. First, let's calculate the purchase price after the cash discount:

Purchase price = List price - (List price * cash discount rate)

Purchase price = $87,000 - ($87,000 * 0.02)

Purchase price = $87,000 - $1,740

Purchase price = $85,260

Next, let's calculate the total cost:

Total cost = Purchase price + Freight costs + Installation and testing costs + Insurance costs

Total cost = $85,260 + $2,600 + $3,600 + $4,600

Total cost = $96,060

Therefore, the amount of cost recorded in the asset account would be $96,060.

Answer 2

$91,460

Step-by-step explanation:

The amount of cost recorded in the asset account would be:

= List price - (Discount) + Freight + Installation and testing

= $87,000 - $87,000*2% + $2,600 + $3,600

= $87,000 - $1,740 + $2,600 + $3,600

= $91,460

Note: Insurance cots will not be included in cost of machine