Question

Bridgeport Co. both purchases and constructs various equipment it uses in its operations. The following items for two different types of equipment were recorded in random order during the calendar year 2020.

Purchase
Cash paid for equipment, including sales tax of $7,400 $155,400
Freight and insurance cost while in transit 2,960
Cost of moving equipment into place at factory 4,588
Wage cost for technicians to test equipment 5,920
Insurance premium paid during first year of operation on this equipment 2,220
Special plumbing fixtures required for new equipment 11,840
Repair cost incurred in first year of operations related to this equipment 1,924
Construction
Material and purchased parts (gross cost $296,000; failed to take 2% cash discount) $296,000
Imputed interest on funds used during construction (stock financing) 20,720
Labor costs 281,200
Allocated overhead costs (fixed-$29,600; variable-$44,400) 74,000
Profit on self-construction 44,400
Cost of installing equipmen 6,512
Compute the total cost to be capitalized for each of these two pieces of equipment.
Purchase equipment $enter a dollar amount
Construction equipment $enter a dollar amount

Answer 1

See below

Step-by-step explanation:

Total cost of equipment

Cash paid for equipment, including sales tax

$155,400

Freight and insurance cost while in transit

$2,960

Cost of moving equipment into place at factory

$4,588

Wage cost for technicians to test the new equipment

$5,920

Special plumbing fixtures required for new equipment

$11,840

Total cost of equipment

$180,708

Insurance premium paid reported in the profit and loss statement as insurance expense for $2,220

Repair cost of equipment reported in the profit and loss statement as repair and maintenance expense for $1,924

••All expenses up to put to use of fixed assets should be capitalized

Total cost of construction

Material and purchased price [$296,000 × 0.98]

$290,080

Labor cost

$281,200

Overhead cost

$74,000

Cost of installing equipment

$6,512

Total cost of construction

$651,792

•Material and purchase parts costs after discount is taken back because its cash equivalent price

•Inputted interest on funds used during construction(stock financing) is treated as opportunity cost and it should not be reported.