Question

Mendelson Laboratories purchased engineering equipment at a cost of $420,000. Shipping costs totaled $15,000. Installation cost was $8,000. An additional electrical line had to be run to the equipment at a cost of $3,000. Labor and testing costs totaled $6,000. Materials used up in testing cost $3,000. The capitalized cost is:

Answer 1

The capitalized cost is $455,000

Step-by-step explanation:

According to the Standard (IAS 16) costs of an item of Property, Plant and equipment include the Purchase Costs and any other costs directly attributable to placing the asset in the location and condition for use as intended by management.

Calculation of Costs of Equipment :

Purchase Costs $420,000

Shipping costs $15,000

Installation cost $8,000

Electrical line $3,000

Labor and testing costs $6,000

Material in testing $3,000

Total cost $455,000