Question

Great Harvest Bakery purchased bread ovens from New Morning Bakery. New Morning Bakery was closing its bakery business and sold its two-year-old ovens at a discount for $697,000. Great Harvest incurred and paid freight costs of $33,500, and its employees ran special electrical connections to the ovens at a cost of $4,700. Labor costs were $36,300. Unfortunately, one of the ovens was damaged during installation, and repairs cost $4,700. Great Harvest then consumed $870 of bread dough in testing the ovens. It installed safety guards on the ovens at a cost of $1,470 and placed the machines in operation.Prepare a schedule to show the amount at which the ovens should be recorded irn Great Harvest's Equipment account.

Answer 1

Answer: The answer is given below

Explanation:

The schedule showing the amount recorded goes thus:

Particulars Amount($)

Purchase price 697000

Freight costs 33500

Electrical connection 4700

labor costs 36300

Bread dough used in testing oven

870

Safety Guards 1470

Total cost of equipment = 773840

The repairs cost 4700 is excluded because it is not a normal cost of the installation, therefore, it should be recorded as an expense in the income statement.