Question

On May 1, Marie Company purchased new machinery for $70,000 plus 8% sales tax. The machinery was advertised for $72,000. Other costs associated with the machinery were: testing of the new machine, $2,000; delivery cost of $3,600; installation cost, $5,500; and hiring of a new employee to run the machine at $2,880/month. At what amount will the machinery be recorded on a balance sheet?

Answer 1

Answer:

$86,700

Explanation:

The computation of the amount recorded for the machinery is shown below:

= Purchase value of the new machinery + sales tax + testing cost of new machine + delivery cost + installation cost

= $70,000 + $5,600 + $2,000 + $3,600 + $5,500

= $86,700

The sales tax is as follows

= $70,000 × 8%

= $5,600

We simply applied the above formula