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03.07.2022 - 11:02

Rizio Co. purchases a machine for $12,500, terms 2/10, n/60, FOB shipping point. The seller prepaid the $360 freight charges, adding the amount to the invoice and bringing its total to $12,860. The machine requires special steel mounting and power connect

Question:

Rizio Co. purchases a machine for $12,500, terms 2/10, n/60, FOB shipping point. The seller prepaid the $360 freight charges, adding the amount to the invoice and bringing its total to $12,860. The machine requires special steel mounting and power connections costing $895. Another $475 is paid to assemble the machine and get it into operation. In moving the machine to its steel mounting, $180 in damages occurred. Also, $40 of materials is used in adjusting the machine to produce a satisfactory product. The adjustments are normal for this machine and are not the result of the damages.

Compute the cost recorded for this machine. (Rizio pays for this machine within the cash discount period.)

Answers (1)

Celestine April 17, 2023 в 01:06

The cost recorded for this machine is $12,708. To calculate this, we start with the invoice price of $12,860 and subtract the cash discount of 2% ($12,860 x 0.02 = $257.20). This brings the cost down to $12,602.80. To this, we add the additional costs of freight ($360), mounting and connections ($895), assembly ($475), damages ($180), and materials ($40). Adding these costs gives us a total of $14,552.80. However, since Rizio pays within the cash discount period, we subtract the discount amount of $257.20 to arrive at the final cost recorded of $12,708. It's important to record all costs associated with purchasing an asset in order to accurately reflect its true cost on the company's financial statements.

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