Silver mine -4A Determining the cost of an asser l. Goodwill illing Co. purchase

Question

Silver mine -4A Determining the cost of an asser l. Goodwill illing Co. purchased a front-end loader to move stacks of lumber. The loader hac Sef 140,000. The seller agreed to allow a 4 percent discount because Southwest Milli ist price paid cash ovi a.Delivey terms were FOB shipping point. Freight cost amounted to S1,200. Southw a thire a specialist to calibrate the loader. The specialist's fee was $1,800. The loa perator is paid an annual salary of $60.000. The cost of the company's theft insurance po increased by $800 per year as a result of acquiring the loader. The loader had a four-year us life and an expected salvage value of $6,000

Explanation / Answer

Cost of an asset = List price of Loader - discount received of 4% + Freight cost + specialist's fees

= $140000 - (0.04 * $140000) + $1200 + $1800

= $140000 - $5600 + $1200 + $1800

= $137400

Note:- salary to operator and insurance are indirect expenses ,so these expenses will not be capitalised to cost of Loader.

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