Question

On March 1, Bartholomew Company purchased a new stamping machine with a list price of $34,000. The company paid cash for the machine; therefore, it was allowed a 5% discount. Other costs associated with the machine were: transportation costs, $550; sales tax paid, $1,360; installation costs, $450; routine maintenance during the first month of operation, $500. What is the cost of the machine?

Answer 1

Step-by-step explanation:

The cost principle states that costis recorded at the price actually paid for an item. The routine maintenance cost is not added to the asset acquisition cost because it is not a fsctor for the acquisition of the stamping machine.

Computation for asset Acquisition Cost:

Particulars . Amount

Purchase Cost $34,000

Add: Freight-in Expense

$550

Add: Installation Cost $450

Less: Purchase Discount ($34,000 x 5%) = $1,700

Add: Sales Tax Paid $1,360

Total: Asset Acquisition Cost $34,660

Answer 2

Step-by-step explanation:

List Price $34,000

Discount($34,000*5%) (1,700)

Transpiration $550

Sales Tax $1,360

Installation Cost $450

Total Cost of Machine $34,660

Please note that maintenance cost is revenue expense therefore excluded from cost of machine.