Question 1 5 Points Mad Hatter Enterprises purchased new equ

Question 1: 5 Points Mad Hatter Enterprises purchased new equipment for $356,000, terms f.ob. shipping point. Other costs connected with the purchase were as followS: 29,200 5,400 800 State sales tax Freight costs Insurance while in transit Insurance after equipment placed in service 1,200 Installation costs Insurance for the first year of operations 2,400 Testing 2,000 700 Required: Determine the capitalized cost of the equipment.

Solution

Mad Hatter Enterprises Capitalized cost of the equipment Purchase Price of Equipment $ 3,56,000.00 State sales Tax $     29,200.00 Freight Cost $       5,400.00 Insurance while in transit $           800.00 Installation Cost $       2,000.00 Testing $           700.00 Total Capitalized cost of Equipment $ 3,94,100.00 Note: All Expenses directly attributable to bringing the assets are capitalized. 1) Insurance Premium paid to the insurance company after it is put to use cannot be capitalzed, it will be treated as an expense in profit & loss account. 2) Insurance after equipment placed in service and insurance for the first year of operations not included in capitalized cost of equipment.