Question

In January, Prahbu purchased a new machine for use in an existing production line of his manufacturing business for $98,000. Assume that the machine is a unit of property and is not a material or supply. Prahbu pays $3,925 to install the machine, and after the machine is installed, he pays $2,250 to perform a critical test on the machine to ensure that it will operate in accordance with quality standards. On November 1, the critical test is complete, and Prahbu places the machine in service on the production line. On December 3, Prahbu pays another $5,200 to perform periodic quality control testing after the machine is placed in service. How much will Prahbu be required to capitalize as the cost of the machine

Answer 1

$104,175

Step-by-step explanation:

Calculation to determine How much will Prahbu be required to capitalize as the cost of the machine

Purchase price $98,000

Add Installation cost $3,925

Add Critical test cost $2,250

Machine Capitalize cost $104,175

($98,000+$3,925+$2,250)

Therefore How much will Prahbu be required to capitalize as the cost of the machine is $104,175