The folowing information applies to the questions displayed below During Year 1,

Question

The folowing information applies to the questions displayed below During Year 1, Ashkar Company ordered a machine on Jenuary 1 et an involce price of $21000 On the date of delivery, Jenuary 2, the company oeid $6,000 on the machine, with the balance on credit at s0 percent interest due in six months. On January 3, paid $1,000 freight on the mechine. On January 5 Ashkar paid nstallation costs relating to the machine ano ntin to SS·On July t the co pay pad te balance due on the machine plus the interest. On December 3t the end of the accounting period), Ashkar recorded depreciation on the machine using the straight-ine method with an estimated useful life of 10 years and an estimeted residual value of $4,000. 10.00 points 2. Compute the acquisition cost of the machine Aoquisition cost

Explanation / Answer

Acquisition cost of the machine $ Cost of machine 21000 Freight charges 1000 Installation costs 2500 Acquisition cost 24500 The interest amount of $750 (15000*10%*6/12) should be charged to income statement (expenses)

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