Question

Trinkle Company made several purchases of long-term assets in 2018. The details of each purchase are presented mere New Office Equipment 1. List price: $40,000: terms: 2/10, 1/30:paid within the discount period. 2. Transportation-inc $840. 3. Insta ation: $480 4. Cost to repair damage during unloading: $456. 5. Routine maintenance cost after eight months: $150. Basket Purchase of copier, Computer, and Scanner for $47,700 with Fair Market Values 1. Copler, $23.575 2. Computer, $9.200. 3. Scanner, $24.725. Land for New Warehouse with an Old Building Torn Down 1. Purchase price, $80.400. 2. Demolition of building. $4.640. 3. Lumber sold from old building. $2,500. 4. Grading in preparation for new building, $3,800. 5. Construction of new building. $259,000. Required In each of these cases, determine the amount of cost to be capitalized in the asset accounts. Office equipment Asset Allocated Costs Office equipment Basket purchase: Allocated Asset Costs Copier Computer Scanner Total $ 0 Land and building: Allocated Asset Costs Cost of land Construction costs Total costs

Answer 1

Please find below table useful to compute desired results: -

A H 2 List Price 3 Transportation-in 4 Installation 5 Cost to repair 6 Routine maintenance cost B New Office Equipment 40000 Computation of cost to be capitalized 840 Particulars Amount Purchase Price =B2-B2*2% 456 Transportation costs =B3 Installation costs =B4 Amount of cost to be capitalized =SUM(E4:56) Routine expense and avoidable expenses are not included 7 9 Basket Purchase 47700 FMV 23575 9200 24725 Asset Copier Computer Scanner Computation of cost to be capitalized %age of FMV Purchase Price Allocated Cost =B13 =E13/E16 =B11 =G13*F13 =B14 1=E14/E16 =B11 =G14*F14 =B15 =E15/E16 =B11 G15*F15 =SUM(E13:E15) =SUM(H13:H15) 10 11 Purchase Price 12 FMV of 13 Copier 14 Computer 15 Scanner 16 17 18 19 Purchase Price 20 Demolition of building 21 Lumber sold from Old Building 22 Grading in preparation for new building 23 Construction of new building 80400 4640 2500 8800 259000 =B19 Land and Building Computation of cost to be capitalized Particulars Land Purchase Price Cost of demolition =B20 Sale of Lumber =-B21 Grading Cost =B22 Total Cost of Land =SUM(E21-E24) Building Construction Cost =B23 Total Cost of Building =E27 Act Got

End results would be as follows: -

2 3 4. 5 6 A B C New Office Equipment List Price 40,000 Computation of cost to be capitalized Transportation-in 840 Particulars Amount Installation 480 Purchase Price 39,200 Cost to repair 456 Transportation costs 840 Routine maintenance cost 150 Installation costs 480 Amount of cost to be capitalized 40,520 Routine expense and avoidable expenses are not included Basket Purchase 47.700 10 11 Purchase Price 12 FMV of 13 Copier 14 Computer 15 Scanner Allocated Cost 19,557 23,575 9.200 24.725 Asset Copier Computer Scanner Computation of cost to be capitalized FMV %age of FMV Purchase Price 23.575 41% 47.700 9.200 16% 47,700 24.725 47,700 57,500 7,632 20,511 47.700 16 17 18 19 Purchase Price 20 Demolition of building 21 Lumber sold from Old Building 22 Grading in preparation for new building 23 Construction of new building Land and Building 80.400 Computation of cost to be capitalized 4,640 Particulars Land 2.500 Purchase Price 80,400 8.800 Cost of demolition 4,640 259.000 Sale of Lumber (2,500) Grading Cost 8.800 Total Cost of Land 91.340 Building Construction Cost 259,000 Total Cost of Building 259,000