Question

Louisiana Logging Co. purchased an electronic saw to cut various types and sizes of logs. The saw had a list price of $160,000. The seller agreed to allow a 5 percent discount because Louisiana paid cash. Delivery terms were FOB shipping point. Freight cost amounted to $3,200. Louisiana had to hire an individual to operate the saw. Louisiana had to build a special platform to mount the saw. The cost of the platform was $2,500. The saw operator was paid an annual salary of $50,000. The cost of the company’s’ theft insurance policy increased by $1,800 per year as a result of acquiring of the saw. The saw had a five-year useful life and an expected salvage value of $25,000.

Required
a. Determine the amount to be capitalized in an asset account for the purchase of the saw.
b. Record the purchase in general journal format.



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  • CreatedOctober 26, 2013
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