Question

Grab Manufacturing Co. purchased a 10-ton draw press at a cost of $172,000 with terms of 2/15, n/45. Payment was made within the discount period. Shipping costs were $4,600, which included $220 for insurance in transit. Installation costs totaled $11,100, which included $4,900 for taking out a section of a wall and rebuilding it because the press was too large for the doorway. The capitalized cost of the 10-ton draw press is:

Answer 1

Answer:

$184,260

Explanation:

Total cost of draw press is $172,000 and if it paid 15 days, there will be a discount of 2% and it is paid within the discount period

The discount is = $172,000 * 2/100 = $3,440

Total amount that would be capitalized is:

= ($172,000 - $3,440) + $4,600 + $11,100

= $168,560 + $4,600 + $11,100

= $184,260

So, the capitalized cost of the 10-ton draw press is $184,260

Note:

- The shipping costs and installation cost will be capitalized

- The cost of insurance in transit and cost incurred to remove a section of a wall will be capitalized as well as they are included in the cost above already