Question

Wonder Mountain Company operates a snow sports resort for skiers and snowboarders. The company has recently decided to replace an existing old chair lift with a new high-speed quad chair and expand the hill to allow for increased capacity. The old chair lift was a $822,000 asset on the books, 90% depreciated. The work was completed from April to November. Wonder Mountain incurred the following costs for the expansion:

Invoice price high-speed quad chair lift	$	1,694,000
Costs to dismantle old chair lift		32,200
Cash received for sale used chair lift		169,400
Shipping costs for delivery		20,740
Landscape architect fees, grading expansion hill		8,340
Permit costs		5,620
Clearing trees/grading land for expansion		48,500
Installation of concrete bases for chair lift		105,000
Helicopter rental to install towers for chair lift		92,000
Labour installation ski lift		310,000
Training employees on maintenance and operation		9,600
Testing of chair lift		30,400
Interest costs on loan for construction		69,000
General overhead costs		34,200
Annual routine maintenance		49,800
Purchase tools required for annual maintenance		85,200

Required:
Calculate the total cost for each asset:

land

tools

ski lift

Answer 1

Determine the total cost of land, ski lift and tools: Land Tools Ski lift $1.694.000 $32,200 ($169,400) $20.740 $8.340 $5.620 $48,500 Particulars Invoice price Cost to dismantle old chair lif Cash received from sale Shipping cost Landscape architect fees Permit fees Clearing trees grading Installation of concrete Helicopter rentals Labor installation Training employees Testing Interest cost General overhead Annual routine Purchase cost of tools Total cost $105,000 $92.000 $310.000 $9,600 $30,400 $69,000 $85,200 $62,460 $2,532,340 585,200 Therefore, the total cost of land is $62,460 ; Ski lift is $2,532,340 and tools are 585,200 Notes: The general overhead and annual routine costs are considered as revenue cost. It is not added to determine the total cost of land, ski lift and tools.