Answer: $89,550
Step-by-step explanation:
When capitalizing the cost of a fixed asset, all the costs that were associated with acquiring it and setting it up for use are to be capitalized. This includes the cost of purchase, transportation and installation.
Periodic costs are to be expensed.
Cost to be capitalized:
= Purchase price + Installation price + Cost of critical test (this is needed to find out if the machine is operate appropriately so should be capitalized)
= 85,000 + 2,950 + 1,600
= $89,550