Asked by Jason Brownlee on May 17, 2024
Verified
Waterloo Corporation purchased factory equipment for a cost of $1,800,000.There was also the cost of $100,000 for delivery,$220,000 for installation and modifications to the factory building,and $60,000 in interest costs on borrowed funds used to acquire the equipment.
Calculate the acquisition cost of the new equipment.
Acquisition Cost
The total cost associated with acquiring a new asset or company, including purchase price and all other expenses.
Interest Costs
Interest costs refer to the expenses incurred by borrowing funds, represented as the cost of the interest payments on debt.
- Understand the fundamental concepts of accounting for physical assets such as buildings and machinery, encompassing their procurement, depreciation, and disposal.
Verified Answer
BL
Brittany LaskeroMay 24, 2024
Final Answer :
Equipment cost = $2,120,000 = $1,800,000 + $100,000 + $220,000.Interest is not capitalized because the equipment was purchased and not self-constructed.
Learning Objectives
- Understand the fundamental concepts of accounting for physical assets such as buildings and machinery, encompassing their procurement, depreciation, and disposal.