Question

Sydney Lanes, a local bowling alley, installed automatic scorekeeping equipment. The electrical work required to prepare for the installation was $18,000. The invoice price of the equipment was $180,000.Additional costs were $3,000 for delivery and $600 for insurance during transportation. During the installation, a component of the equipment was damaged because it was carelessly left on a lane and hit by the automatic lane cleaning machine. The cost of repairing the component was $2,250. What is the cost that should be capitalized of the automatic scorekeeping equipment?

Answer 1

Step-by-step explanation:

The cost that should be capitalized of the automatic scorekeeping equipment is $201,750.

To arrive at this answer, we need to add up all the costs incurred in preparing for and acquiring the equipment. These costs include:

1. Electrical work: $18,000

2. Invoice price of equipment: $180,000

3. Delivery: $3,000

4. Insurance during transportation: $600

5. Cost of repairing damaged component: $2,250

Adding these costs together gives us a total of $203,850. However, we need to subtract the cost of repairing the damaged component since it is considered a repair expense and not part of the cost of acquiring the equipment. Therefore, the cost that should be capitalized of the automatic scorekeeping equipment is $201,750.