Question

Alexander Industries is considering a project that requires an investment in new equipment of $3,200,000, with an additional $160,000 in shipping and installation costs. Alexander estimates that its accounts receivable and inventories need to increase by $640,000 to support the new project, some of which is financed by a $256,000 increase in spontaneous liabilities (accounts payable and accruals). The total cost of Alexander’s new equipment is ________ and consists of the price of the new equipment plus the ______. In contrast, Alexander’s initial investment outlay is __________.

Answer 1

Answer:

The total cost is 3,360,000 and consiste of the proce of the new equipment plus the shipping and installtion cost. In contrast, Alexander's initial investment outlay are liabilities.

Explanation:

acquisition cost + shipping and installation cost = equipment value

3,200,000  + 160,000 = 3,360,000

The increase in liablities, will be that, liabilities, not cost, because is not associate with the equipment being ready to use. The equipment is ready to use, once is installed. so shipping and installment cost should be activated, not the accruals and account payable.