Question

On April 1, 2016, Bennett Corporation purchased a new machine on a deferred payment basis. A down payment of $5,000 was made and 10 monthly installments of $14,000 each are to be made beginning on May 1, 2016. The cash equivalent price of the machine was $130,000. Bennett incurred and paid installation costs amounting to $6,000. The amount to be capitalized as the cost of the machine is ___________.

Answer 1

$136,000

Step-by-step explanation:

The computation of amount to be capitalized as the cost of the machine is shown below:-

Cost of the machine to be capitalized = Cash equivalent price of the machine + Cost of installation

= $130,000 + $6,000

= $136,000

Therefore for computing the Cost of the machine to be capitalized we simply added Cash equivalent price of the machine and Cost of installation