Kegler Bowling installs automatic scorekeeping equipment with an invoice cost of

Question

Kegler Bowling installs automatic scorekeeping equipment with an invoice cost of $190,000. The electrical work required for the installation costs $20,000. Additional costs are $4,000 for delivery and $13,700 for sales tax. During the installation, a component of the equipment is carelessly left on a lane and hit by the automatic lane-cleaning machine. The cost of repairing the component is $1,850 What is the total recorded cost of the automatic scorekeeping equipment? Included DR Machinery Excluded DR Expense Total cost Invoice cost Electrical work required for installation Delivery costs Sales tax Repair costs 190,000 20,000 4,000 13,700 1,850 $ 229,550 Total

Explanation / Answer

note: all the costs required to make the machine ready for intended use will be capitalised, where as the costs which are recurring in nature such as repairs will be expensed, subject to a few exceptions.

Accordingly all the given costs except repair of the component will be included in the cost of machinery.

Total cost Included / Excluded Dr Machinery Dr Expense Invoice cost $190,000 Included $190,000 Electrical work required for installation 20,000 included 20,000 Delivery costs 4,000 included 4,000 Sales tax 13,700 included 13,700 Repair costs 1,850 excluded 1,850 Total $229,550 $227,700 $1,850

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