+1-415-670-9189
info@expertsmind.com
Cost of acquistion-capitalizable costs-current expense
Course:- Managerial Accounting
Reference No.:- EM1349755




Assignment Help
Assignment Help >> Managerial Accounting

The invoice of a machine is $40,000. Various other costs relating to the acquistion and installation of the machine including transportation, electrical wiring, special base, and so on amount to $7,500. The machine has an estimated life of 10 yrs, with no residual value at the end of that period.

The owner of the business suggests that the incidental costs of $7,500 be charged to expense immediately for the following reasons:

1. If the machine should be sold, these costs can not be recovered in the sales price.

2. The inclusion of the $7,500 in the machinery account on the books will not necessarily result in a closer approximation of the market price of this asset over the years, because of the possibility of changing demand and supply levels.

3. Charging the $7,500 to expense immediately will reduce federal income taxes.

Instructions:

Discuss each of the points made by the owner of the business.




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Managerial Accounting) Materials
Indicated below whether each item is a separate performance obligation and allocate the transaction price of 120,000 Pro tab Packages to the separate performance obligations i
Allocation of support center costs is an important topic for product costing. In recent years, the issue of accurate product costing has assumed considerable importance.
The equipment will be depreciated over a five-year period using straight-line depreciation with no residual value. Determine the accounting rate of return of the new business.
What is the firm's current receivables balance? What would be the firm's new receivables balance if Milwaukee Surgical toughened up on its collection policy, with the result
Focusing on a 10 percent required rate of return, what would be the opportunity cost to the company of using the ship in the Caribbean/Eastern Canada itinerary rather than a
Monthly budgeted fixed overhead is $14,000. Revenues for the month were $75,000, and selling and administrative expenses were $5,000. Compute the price and quantity variances
What considerations go into choosing a cost allocation plan? Companies can choose among a few allocation methods. Do some methods make more sense in certain situations than
Calculate the total projected sales for the quarter and At the local ice cream shop, there's a sign posted that reads, "If you don't receive a receipt, your next ice cream is