Question

On January 2, 2020, Oriole Company replaced its boiler with a more efficient one. The following information was available on that date: Purchase price of new boiler $143500 Carrying amount of old boiler 9700 Fair value of old boiler 4700 Installation cost of new boiler 19800 The old boiler was sold for $4700. What amount should Oriole capitalize as the cost of the new boiler

Answer 1

$163,300

Step-by-step explanation:

Oriole Company

Purchase price of new boiler +Installation cost of new boiler = Costs of new boiler

Purchase price of new boiler $143,500

Add Installation cost of new boiler $19,800

Costs of new boiler $163,300

Therefore the amount Oriole should capitalize as the cost of the new boiler is $163,300

Answer 2

$163,300

Step-by-step explanation:

Cost of the new boiler = Purchase price of new boiler + Installation cost of new boiler

Cost of the new boiler = $143,500 + $19,800

Cost of the new boiler = $163,300

The Carrying amount of old boiler, Fair value of old boiler and Sale price of old boiler would be considered to find out the gain or loss and recorded in the books of Oriole Company, but would not be considered in the cost of new boiler.