Question

Anchor Company purchased a manufacturing machine with a list price of $93,000 and received a 2% cash discount on the purchase. The machine was delivered under terms Free On Board shipping point, and freight costs amounted to $3,800. Anchor paid $5,400 to have the machine installed and tested. Insurance costs to protect the asset from fire and theft amounted to $7,000 for the first year of operations. Based on this information, the amount of cost recorded in the asset account would be:

Answer 1

Answer:

$100,340

Explanation:

The amount of cost recorded in the asset account would be:

List price                                    $93,000

Less: Discount ($93,000*2%)   $1,860

Add: Freight                               $3,800

Add: Installation&Testing          $5,400

Cost of the machine                 $100,340

Note: Insurance cost is not included in the cost of the machine