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Costs of Acquisition the invoice price of a machine is $50,000. Various other costs relating to the acquisition and installation of the machine including transportation, electrical wiring, and special base, and soon amount to $7,500 The machine has an estimated life of 10 years, 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 cannot 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. Discuss each of the points raised by the owner of the business.
Betsy receives a salary of $50,000 from her employer (a retail clothing store) and several fringe benefits. Her employer pays premiums of $300 for her $40,000 group term life insurance coverage and pays $2,400 for medical insurance premiums.
Wilson's Meats has computed its fixed costs to be $.60 for every pound of meat it can sell given an average daily sales level of 500 pounds. It charges $3.89 per pound of top-grade ground beef. The variable cost per pound is $2.99. What is the con..
Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $80,000 and $120,000 respectively. Income Summary has a credit balance of $30,000. What is Tomas' capital balance after closing Income Summary to Capita..
Al's Car Wash purchased a piece of equipment on October 1, 20x7, for $27,000. The equipment has an estimated life of four years or 40,000 units of production and an estimated residual value of $2,000.
argentina partners is concerned about the possible effects of inflation on its operations. presently the company sells
Zeppo Supply Company manufactures cleaning products. During the year, the company spent $600,000 on chemicals and $728,000 on conversion costs. Overhead is applied at a rate of 180% of direct labor costs. How much did the company spend on manufact..
On January 1, 2010, West Co. exchanged equipment for a $400,000 zero-interest-bearing note due on January 1, 2013. The prevailing rate of interest for a note of this type at January 1, 2010 was 10%. The present value of $1 at 10% for three periods..
If all the stamps sold in 2007 were presented for redemptionin 2008, the redemption cost would be $5,200,000. What amount should Hairston report as a liability for stamp redemptions at December 31, 2007?
During 2012, Crop-Paper-Scissors, a craft store, changed to the LIFO method of accounting for inventory. Suppose that during 2013 they switch back to the FIFO method and the following year switch back to LIFO again.
This assessment will require you to conduct financial statement analysis based on your financial ratio calculations as well as your observation about the company executives' ethical behaviour and the level of quality of the corporate social responsib..
the cabinet shoppe is considering the addition of a new line of kitchen cabinets to its current product lines. expected
what are erosion costs? provide one real-life example of an erosion cost for a project. should erosion costs be
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