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Theory & Problems Student Name The complete test is due back in class on March 1

ID: 2543971 • Letter: T

Question

Theory & Problems Student Name The complete test is due back in class on March 17, 2018 by 12:30pm. No exception will b Test #2 March 10, 2018 granted for late submission. Questions 1-10 with 10 points each, Questions 11-14, Extra Credit with 5 points each Grumpy installed new assembly line production equipment at a cost of $250,000. Grumpy had to rearrange the assembly line and remove a wall to install the equipment. The rearrangement cost was $25,000 and the wall removal cost was $5,000. The rearrangement did not increase the life of the assembly line but it did make it more efficient. Additionally, Grumpy paid $10,000 for the permit for construction. What amount of these costs should be capitalized by Grumpy? 2.

Explanation / Answer

Ascertainment of amounts to be capitalized by the company

Cost of the Equipment                                    = $ 2,50,000

Rearrangement Cost                                       = $ 25,000

Removal Cost                                                 = $ 5,000

Permit charges paid for construction             = $ 10,000

Total amount to be capitalized                     = $ 2,90,000