Question

At the beginning of the year, Plummer's Sports Center bought three used fitness machines from Brunswick Corporation. The machines immediately were overhauled, installed, and started operating. The machines were different; therefore, each had to be recorded separately in the accounts.
Machine A Machine B Machine C
Amount paid for asset $11,000 $30,000 $8,000
Installation costs 500 1,000 500
Renovation costs prior to use 2,500 1,000 1,500
By the end of the first year, each machine had been operating 4,800 hours
Compute the cost of each machine.

Answer 1

Answer:

(i) $14,000

(ii) $32,000

(iii) $10,000

Explanation:

Cost of the machine that is recorded in the books of accounts is the total cost incurred to make the machine useful and useable.

Cost for each machine:

= amount paid for the assets + installation costs + renovation cost prior to use.

Therefore,

Cost of Machine A = 11,000 + 500 + 2,500

                               = $14,000

Cost of Machine B = 30,000 + 1,000 + 1,000

                               = $32,000

Cost of Machine C = 8000 + 500 + 1500

                               = $10,000