Smith company purchases equipment for a contract price of $300,000 with terms of 2/10 n 30. They...
Question:
Smith company purchases equipment for a contract price of $300,000 with terms of 2/10 n 30. They incur sales tax of $18,000 transportation costs of $5,000 and installation costs of $15,000 and uninsured damages of $7,000.
Prepare the entry assuming the company does not take the discount.
Fixed Assets:
A fixed asset's cost should only comprise those costs necessary for its intended use. We make this bifurcation as capital expenditure is not reported on an income statement, but a revenue expense is.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answer
Smith company's entry assuming the company does not take the discount is made below:
The first entry is to recognize the purchases:
| Account Title | ... |
See full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
Acquisition of Property, Plant & Equipment
from
Chapter 9 / Lesson 4
7.3K
One of the main categories of long-term assets is known as property, plant, and equipment, encompassing the location, buildings, and equipment needed in production. Learn how the acquisition of property, plant, and equipment is recorded and documented through an example of journaling.
Related to this Question
- John company purchases equipment for a contract price of $300,000 with terms of 2/10 n 30. They incur a sales tax of $18,000 transportation costs of $5,000 and installation costs of $15,000 and uninsu
- Worthington Chandler Company purchased equipment for $10,000. Sales tax on the purchase was $500. Other costs incurred were freight charges of $200, repairs of $350 for damage during installation, and installation costs of $225. What is the cost of the eq
- On March 1, Wright Company purchased new equipment for $52,000 by paying cash. Other costs associated with the equipment were: transportation costs, $1,400; sales tax paid $3,400; and installation cos
- Oaktree Company purchased new equipment and made the following expenditures: Purchase price $63,000 Sales tax $4,000 Freight charges for shipment of equipment $880 Insurance on the equipment for the first year $1,080 Installation of equipment $2,800 The
- Crane Company purchased equipment and these costs were incurred: Cash price $65,000 Sales taxes 4,100 Insurance during transit 700 Installation and testing 950 Total costs $70,750 Crane will record the acquisition cost of the equipment as: A) $65,000. B
- Teel, Inc. bought a new forklift and incurred the following costs in association with the purchase: Purchase price: $25,000 State sales tax: $2,100 Delivery fees: $350 Liability insurance for year 1: $1,200 At what value will the forklift be reported on T
- The company purchased equipment having an invoice price of $17,500. The terms of sale were 4/10, n/30, and Harvard paid within the discount period. In addition, Harvard paid a $140 delivery charge, $210 installation charge, and $941 sales tax. The amount
- All of the following are included in the acquisition cost of property, plant, and equipment except: a. transportation costs. b. taxes on the purchase. c. installation costs. d. maintenance costs.
- Frank Fleming recently purchased some new equipment that he plans to use in his business. He paid $43,000 for the equipment. He also paid $2,500 in delivery and installation costs, $1,600 in legal fees, and $3,800 in sales taxes.
- The capitalized cost of equipment excludes ______. (a) sales tax (b) insurance for the first year (c) shipping (d) installation.
- Circle Co. purchased a piece of equipment by paying $10,000 cash. There was shipping cost of $1,200 and a renovation cost of $3,200 to the building to get the space ready for the installation. There w
- Smith Inc. purchased a piece of equipment for $900,000 on June 1, 2019 paying $80,000 in down payment and signing a note for the rest of the amount. Smith has agreed to make twenty equal quarterly payments for five years beginning September 1, 2019. Th
- Exercise 10-5 Ben Sisko Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment. Abstract company?s fee for title
- Smith Company purchases land, a building and equipment for $200,000. The fair values of the assets are as follows: Land: $50,000 Building: $150,000 Equipment: $50,000 Prepare the entry for the purchas
- Which of the following is NOT a part of the acquisition cost of an equipment purchase? a. Transportation costs to deliver the equipment b. Installation costs to set up and test the equipment c. Sales tax on the purchase Interest cost on the loan to financ
- These expenditures were incurred by Shumway Ltd. in purchasing land: cash price $54,820; legal fees $2,210; removal of old building $5,170; the cost of clearing and grading $4,430; installation of fen
- Harvard Company purchased equipment having an invoice price of $28,300. The terms of sale were 4/10, n/30, and Harvard paid within the discount period. In addition, Harvard paid a $185 delivery charge, $225 installation charge, and $959 sales tax. The amo
- The following costs were incurred by Shumway Company in purchasing land: Cash price $84,000 Removal of the old building $5,200 Legal fees $3,000 Clearing and grading $3,500 Installation of a fence $3,
- Somerset Company acquired a piece of equipment with a list price of $200,000 for $166,000. Freight to Somerset's location was $10,000. Installation and testing costs were $10,500. An old piece of equipment was scrapped as a result of this new purchase. Th
- Somerset Company acquired a piece of equipment with a list price of $200,000 for $158,000. Freight to Somerset's location was $7,000. Installation and testing costs were $9,500. An old piece of equipment was scrapped as a result of this new purchase. The
- Somerset Company acquired a piece of equipment with a list price of $200,000 for $180,000. Freight to Somerset's location was $5,000. Installation and testing costs were $8,500. An old piece of equipment was scrapped as a result of this new purchase. The
- Somerset Company acquired a piece of equipment with a list price of $200,000 for $188,000. Freight to Somerset's location was $9,000. Installation and testing costs were $6,500. An old piece of equipment was scrapped as a result of this new purchase. The
- Somerset Company acquired a piece of equipment with a list price of $200,000 for $186,000. Freight to Somerset's location was $5,000. Installation and testing costs were $8,500. An old piece of equipment was scrapped as a result of this new purchase. The
- Merchant Company purchased property for a building site The costs associated with the property were: Purchase price $191,000 Real estate commissions 16,600 Legal fees 2,400 Expenses of clearing the l
- Silverado Company purchased equipment having an invoice price of $8,000. The terms of sale were 2/10, n/30, and Silverado paid within the discount period. In addition, Silverado paid a $100 delivery charge, $130 installation charge, and $550 sales tax. T
- A company acquired equipment for $25,000. It paid $2,000 for sales tax, $1,000 for shipping, and $2,000 for installation. The equipment: a. should be recorded at $25,000. b. should be recorded at $26,000. c. should be recorded at $28,000. d. should be rec
- Merchant Company purchased property for a building site. The costs associated with the property were: Purchase price $ 189,000 Real estate commissions 16,400 Legal fees 2,200 Expenses of clearing the
- Merchant Company purchased property for a building site. The costs associated with the property were: Purchase price $185,000; Real estate commissions $ 15,000 Legal fees $700; Expenses of clearing the land $2,00; Expenses to remove old building $4,000.
- Runge Company purchased machinery on January 1 at a list price of $200,000, with credit terms 2/10, n/30. Payment was made within the discount period. Runge paid $10,000 sales tax on the machinery, and paid installation charges of $3,520. Prior to install
- Intermountain Delivery Company acquired an adjacent lot to construct a new warehouse, paying $100,000 and giving a short-term note for $700,000. Legal fees paid were $5,000, delinquent taxes assumed were $18,500, and fees paid to remove an old building fr
- Intermountain Delivery Company acquired an adjacent lot to construct a new warehouse, paying $100,000 and giving a short-term note for $700,000. Legal fees paid were $5,000, delinquent taxes assumed were $18,500, and fees paid to remove an old building f
- Which of the following costs associated with a land purchase is not a component of the land cost reported on a balance sheet? a. the payment of delinquent property taxes b. the incurrence of legal fees c. the cost of title insurance d. the land's appraise
- Bing Leasing, Inc. agrees to lease equipment to Boyd, Inc. on January 1, 2012. They agree on the following terms. 1) The normal selling price of the equipment is $900,000 and the cost of the asset to
- A company purchased property for a building site. The costs associated with the property are given below. Purchase price = $175,000 Real estate commissions = $15,000 Legal fees = $800 Expenses of clearing the land = $2,000 Expenses to remove old building
- Depreciation Tax Shield: Wong, Pemberton, and Janakowski, LLP, recently purchased a new facility to house the partnership's accounting firm. The facility cost $460,000. The partnership will depreciate
- Yale Company purchased equipment having an invoice price of $21,500. The terms of sale were 2/10, n/30, and Yale paid within the discount period. In addition, Yale paid a $320 delivery charge, $350 installation charge, and $1,183 sales tax. What is the am
- Smith Enterprises purchases a 16-unit apartment complex for $1,100,000 on June 7th. An appraisal reveals the fair market value of the land to be $300,000 and the building to be $900,000. 1. Calculate the first-year depreciation for the apartment complex.
- Lake Company recently incurred the following costs: 1. Purchase price of land and dilapidated building $250,000. 2. Real estate broker's commission is $14,000. 3. Net demolition costs of dilapidated building $39,000. 4. Excavation costs for new buildi
- A company purchased office equipment for $24,500 and paid $1,470 in sales tax, $550 for installation, $3,200 for a needed adjustment to the equipment, and $2,600 for supplies that will be used for per
- RT Inc. purchased a tract of land for use as a factory site. The purchase price was $780,000. RT also incurred the following costs: Cost to raze old building ($70,000), legal fees related to the purchase contract ($10,000), and proceeds from the sale of s
- Assume a company has equipment with a book value of $50,000. The Company can sell the equipment through a broker for $90,000 less a 4% commission fee. Alternatively, the Company could lease
- Merchant Company purchased property for a building site. The costs associated with the property were: Purchase price $176,000 Real estate commissions 15,100 Legal fees 900 Expenses of clearing the land 2,100 Expenses to remove old building 1,100 What por
- Ben Sisko Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment. Abstract company?s fee for title search $1,669
- Sandhill Co. purchased equipment on January 1 at a list price of $160000, with credit terms 4/10, n/30. The payment was made within the discount period. Sandhill paid $6750 sales tax on the equipment and paid installation charges of $2500. Before installa
- Denney Company incurs these expenditures in purchasing a truck: cash price $17,557; accident insurance (during use) $1,605; sales taxes $1,585; motor vehicle license $258; and painting and lettering $1,186. What is the cost of the truck?
- Absolute Leasing, Inc. agrees to lease equipment to Allen, Inc. on January 1, 2012. They agree on the following terms: 1) The normal selling price of the equipment is $1,500,000 and the cost of the a
- These expenditures were incurred by Dunston Company in purchasing land: cash price $57,060; accrued taxes $4,710; attorney's fees $2,210; real estate broker's commission $3,930; and clearing and grading $4,330. What is the cost of the land?
- These expenditures were incurred by Dunston Company in purchasing land: cash price $55,410; accrued taxes $5,220; attorney's fees $2,940; real estate broker's commission $3,450; and clearing and grading $4,970. What is the cost of the land?
- Crane Company purchased machinery on January 1 at a list price of $360,000, with credit terms 3/10, n/30. The payment was made within the discount period. Crane paid $74,000 sales tax on the machinery and paid installation charges of $4,800. Prior to inst
- On January 1, 2008, Charlie Doss Company contracts to lease equipment for 5 years, agreeing to make a payment of $94,732 (including the executory costs of $6,000) at the beginning of each year, starting January 1, 2008. The taxes, the insurance, and the m
- Absolute Leasing, Inc. agrees to lease equipment to Allen, Inc. on January 1, 2012. They agree on the following terms: (a) The normal selling price of the equipment is $600,000 and the cost of the as
- Absolute Leasing, Inc. agrees to lease equipment to Allen, Inc. on January 1, 2012. They agree on the following terms: (a) The normal selling price of the equipment is $1,500,000 and the cost of the
- Absolute Leasing, Inc. agrees to lease equipment to Allen, Inc. on January 1, 2012. They agree on the following terms: (a) The normal selling price of the equipment is $350,000 and the cost of the as
- These expenditures were incurred by Patnode Company in purchasing land: cash price $60,000; accrued taxes $5,000; attorney's fees $2,100; real estate broker's commission $3,300; and clearing and grading $3,500. What is the cost of the land?
- Trudy Company incurred the following costs. 1. Sales tax on factory machinery purchased: $5,000 2. Painting of and lettering on truck immediately upon purchase: $700 3. Installation and testing of factory machinery: $2,000 4. Real estate broker s commiss
- The following expenditures were incurred by McCoy Company in purchasing land: Cash price $79,000 Accrued taxes $2,800 Attorneys' fees $3,900 Real estate broker's commission $1,100 Clearing and grading $4,000. What is the cost of the land?
- The following expenditures were incurred by McCoy Company in purchasing land: Cash price $68,000 Accrued taxes $3,500 Attorneys' fees $4,200 Real estate broker's commission $1,000 Clearing and grading $3,800 What is the cost of the land?
- The following expenditures were incurred by Obermeyer Company in purchasing land: cash price $71,722, accrued taxes $3,898, attorneys' fees $1,949, real estate broker's commission $1,539, and clearing and grading $4,237. What is the cost of the land?
- Foster Inc. is trying to decide whether to lease or purchase a piece of equipment needed for the next ten years. The equipment would cost $51,000 to purchase, and maintenance costs would be $5,800 per year. After ten years, Foster estimates it could sell
- Freight costs paid on the purchase of new equipment. Are classified as: A. Buildings B. Machinery and Equipment C. Land D. Land Improvements
- Rich Castillo Company incurs the following expenditures in purchasing a truck: cash price $30,000, accident insurance $2,000, sales taxes $2,100, motor vehicle license $100, and painting and lettering $400. What is the cost of the truck?
- Rich Castillo Company incurs the following expenditures in purchasing a truck: Cash price $53,000 Accident insurance $3,800 Sales taxes $3,400 Motor vehicle license $100 Painting and lettering $400. What is the cost of the truck?
- Rich Castillo Company incurs the following expenditures in purchasing a truck: cash price $30,500, accident insurance $2,500, sales taxes $2,600, motor vehicle license $100, and painting and lettering $400. What is the cost of the truck?
- Mr. Smith is an accrual basis taxpayer with multiple lines of businesses. One business is a gas station. The land underneath the gas station did not appear contaminated when Mr. Smith purchased it. Ho
- The following expenditures were incurred by McCoy Company in purchasing land: cash price $50,000, accrued taxes $3,000, attorneys fees $2,500, real estate broker's commission $2,000, and clearing and grading $3,500. What is the cost of the land?
- Vincent pays $20,000 for equipment to use in his trade or business. He pays a sales tax of $800 as a result of the purchase. Must the $800 tax be capitalized as part of the purchase price?
- The following expenditures were incurred by McCoy Company in purchasing land: Cash price $75,000 Accrued taxes $5,400 Attorney's fees $2,800 Real estate broker's commission $1,200 Clearing and grading $4,200 What is the cost of the land?
- Smith Company has purchased a new office building. The company has agreed to pay the developer $69,000 annually for 8 years. Using present value techniques, determine the value that should be recorded for the building when it is purchased. Assume an 11 pe
- When a company purchases land with a building on it and immediately tears down the building so that the land can be used for the construction of a plant, the costs incurred to tear down the building should be: a. Expensed as incurred. b. Added to the cost
- On March 1, a business paid $3,600 for a twelve-month liability insurance policy. On April 1, the business entered into a two-year rental contract for equipment at a total cost of $18,000. Determine the following amounts: a) insurance expense for the mon
- Fraser Manufacturing purchased land next to its factory to be used as a parking lot. The following expenditures were incurred by the company: Purchase price $299,000 Broker's fees $24,900 Title search and other fees $2,200 Demolition of a cottage on the p
- Smith Company has purchased a new office building. The company has agreed to pay the developer $55,000 annually for 9 years. Using present value techniques, determine the value that should be recorded for the building when it is purchased. Assume a 6 perc
- A company purchases property that includes land, buildings, and equipment for $5.4 million. The company pays $181,000 in legal fees, $210,000 in commissions, and $113,000 in appraisal fees. The land is estimated at 23%, the buildings are at 44%, and the e
- Adama Company incurred the following costs. |1. Sales tax on factory machinery purchased | $5,000 |2. Painting of and lettering on truck immediately upon purchase |700 |3. Installation and testing of factory machinery |2,000 |4. Real estate broker's comm
- Pharoah Company incurs these expenditures in purchasing a truck: cash price $ 28,090, accident insurance during use $ 2,360, sales taxes $ 1,860, motor vehicle license $ 530, and painting and letterin
- These expenditures were incurred by Dobbin Company in purchasing land: cash price $60,000, accrued taxes $5,000, attorney's fees $2,100, real estate broker's commission $3,300, and clearing and grading $3,500. a. What is the cost of the land? b. Determi
- Smith has an adjusted gross income (AGI) of $140,000 without taking into consideration $40,000 of losses from rental real estate activities. Smith actively participates in the rental real estate activities. What amount of rental losses may Smith deduct in
- On-Time Delivery Company acquired an adjacent lot to construct a new warehouse, paying $90,000 and giving a short-term note for $50,000. Legal fees paid were $1,750, delinquent taxes assumed were $25,000, and fees paid to remove an old building from the l
- Hollings Company sells and delivers office furniture in the Rocky Mountain area. The costs associated with the acquisition and annual operation of a delivery truck are given below: Insurance $1,600 Licenses $250 Taxes (vehicle) $150 Garage rent for parki
- Fastball Delivery Company acquired an adjacent lot to construct a new warehouse, paying $33,000 and giving a short-term note for $328,000. Legal fees paid were $2,235, delinquent taxes assumed were $9,800, and fees paid to remove an old building from the
- Fastball Delivery Company acquired an adjacent lot to construct a new warehouse, paying $41,000 and giving a short-term note for $319,000. Legal fees paid were $2,070, delinquent taxes assumed were $10,200, and fees paid to remove an old building from the
- Fastball Delivery Company acquired an adjacent lot to construct a new warehouse, paying $30,000 and giving a short-term note for $270,000. Legal fees paid were $1,425, delinquent taxes assumed were $12,000, and fees paid to remove an old building from the
- XYZ Company leased equipment to West Corporation under a lease agreement that qualifies as a finance lease to West but not as a result of a bargain purchase option or a title transfer. The present value of the lease payments is $740,000. The expected econ
- A company purchased the property for $110,000. The property included a building, equipment, and land. The building was appraised at $66,000, the land at $47,000, and the equipment at $20,000. What is the amount of cost to be allocated to the building in t
- A company purchases property that includes land, buildings and equipment for $4.6 million. The company pays $185,000 in legal fees, $212,000 in commissions, and $107,000 in appraisal fees. The land is estimated at 26%, the buildings are at 44%, and the eq
- Smith hired Jones Construction to build a detached garage on her property according to certain specifications for $15,000. The contract called for Smith to pay Jones $5,000 "up front," to disburse an
- Lake Company recently incurred the following costs: 1. Purchase price of land and dilapidated building $250,000. 2. Real estate broker's commission is $14,000. 3. Net demolition costs of dilapidated building $39,000. 4. Excavation costs for new buil
- 1) These expenditures were incurred by Dunston Company in purchasing land: cash price: $56,580; accrued taxes: $5,320; attorney's fees: $3,010; real estate broker's commission: $3,560; and cleari
- On January 1, 20Y8, Smith Company sold land to ASP, Inc. and accepted a 2-year, $500,000 face value note as payment. 6% interest is due each December 31. ASP's market rate of borrowing is 12%. Smith Company originally purchased the land for $80,000 in 20Y
- Fraser Manufacturing purchased land next to its factory to be used as a parking lot. The following expenditures were incurred by the company: purchase price, $300,000; broker's fees, $24,000; title se
- Terms of a lease agreement and related facts were: a. Costs of negotiating and consummating the completed lease transaction incurred by the lessor were $6,203. b. The retail cash selling price of the
- Keaubie Co. purchased land at a cost of $250,000 cash. The property had a building on it that was demolished at a cost of $10,000. Proceeds from salvaged materials from the demolition amounted to $2,100. Attorney's fees were $3,100 and the real estate bro
- Ben Sisko Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment. Abstract company's fee for title search $ 520 Architect's fees 3,170 Cash paid for the land and dil
- Northwest Delivery Company acquired an adjacent lot to construct a new warehouse, paying $75,000 and giving a short-term note for $90,000. Legal fees paid were $2,500, delinquent taxes assumed were $2
- Sweet Company purchased a machine on July 1, 2018, for $35,000. Sweet paid $250 in title fees and county property tax of $156 on the machine. In addition, Sweet paid $625 shipping charges for delivery, and $594 was paid to a local contractor to build and
- Owens, Grubbs, and Riley, LLP, recently purchased a new facility to house the partnership's law practice. The facility cost $500,000. The partnership will depreciate the facility by recording $50,000
- Suppose the backhoe-loader costs $85,000, has zero-expected salvage value, and the annual lease payments are $15,000, payable in advance. If the lease is for seven years, what are Greenfield's after-tax cash flows from leasing, rather than buying the back
- Bahama Catering purchased a commercial dishwasher by paying cash of $11,000. The dishwasher's fair value on the date of the purchase was $12,000. The company incurred $700 in transportation costs and $600 in installation fees, and it also paid $400 for an
- Levi purchases land for $110,000. He incurs legal fees of $1,000 associated with the purchase. He subsequently incurs additional legal fees of $4,000 in having the land rezoned from agricultural to residential. He subdivides the land and installs streets
Explore our homework questions and answers library
Browse
by subject