Question

Grab Manufacturing Co. purchased a 10-ton draw press at a cost of $183,000 with terms of 4/15, n/45. Payment was made within the discount period. Shipping costs were $4,300, which included $270 for insurance in transit. Installation costs totaled $12,900, which included $3,700 for taking out a section of a wall and rebuilding it because the press was too large for the doorway. The capitalized cost of the 10-ton draw press is: Multiple Choice $192,880. $190,880. $196,380. $197,880.

Answer 1

$192,880

Step-by-step explanation:

According to the scenario, computation of the given data are as follow:-

Cost of 10-ton draw press is $183,000 and if the cost paid before 15 days, there will be a 4% discount.

Discount Value is

= Cost of Draw Press × Discount Rate

= $183,000 × 4%

= $7,320

Total Capitalized Amount is

= (Total Cost of Draw Press - Discount Value) + Shipping Cost + Installation Cost

= ($183,000 - $7,320) + $4,300 + $12,900

= $175,680 + $4,300 + $12,900

= $192,880

According to the analysis, the capitalized cost of the 10-ton draw press is $192,880.

Because any cost which incurred for using an asset should be capitalized.