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The document discusses capital expenditures related to machinery acquisition for Negros Company, Shaw Company, and Charry Company, detailing costs that should be capitalized. It provides specific examples of machinery costs, including list prices, discounts, freight, installation, and testing expenses. The solutions to the problems indicate the total capitalizable costs for each company's machinery purchase.

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14 views3 pages

pdf-23-answers_compress (2)

The document discusses capital expenditures related to machinery acquisition for Negros Company, Shaw Company, and Charry Company, detailing costs that should be capitalized. It provides specific examples of machinery costs, including list prices, discounts, freight, installation, and testing expenses. The solutions to the problems indicate the total capitalizable costs for each company's machinery purchase.

Uploaded by

Angeline Bacani
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Pdf-23 - Answers

BS Accountancy (AE 121)

MACHINERY AND CAPITL EXPENDITURES

Problem 31-1

Negros Company acquired new machinery. The following data are available:

List price of the machinery 1,400,000


Cash discount available but not taken on purchase 20,000
Freight paid on the new machinery 40,000
Cost of removing of the old machinery 15,000
Installation cost of the new machinery 50,000
Testing cost before the machinery was put into
regular operation (including P10, 000 in wages
of the regular machinery operator) 30,000
Loss on premature retirement of the old machinery 5,000
Estimated cost of maturing similar machinery
in the entity’s own plant, including overhead 1,300,000

The amount should be capitalized as cost of the machinery?

a. 1,500,000
b. 1,490,000
c. 1,515,000
d. 1,520,000

Solution 31-1 answer a

List price 1,400,000

0 0
Cash discount (20,000)
Freight 40,000
Installation cost 50,000
Testing cost 30,000
Total cost 1,500,000

The cost of removing the old machinery is treated as outright expense.

Problem 31-2
On October 1, 2010, Shaw Company purchased a machine for P 1,260,000 that was placed in
service on November 30, 2010. Shaw incurred additional costs of this machine as follows:

Shipping 30,000
Installation 40,000
Testing 50,000

In Shaw’s December 31,2010 statement of financial position, what amount be reported as


machinery?

a. 1,260,000
b. 1,290,000
c. 1,330,000
d. 1,380,000
e.

Solution 31-2 answer d


All cost are capitalizable.

Problem 31-3
Charry Company is purchasing a second-hand polishing machine. The entity will incur the
following costs:

0 0

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