Question: On July 1 2014 Seto Inc purchased a fire extinguisher

On July 1, 2014, Seto, Inc. purchased a fire extinguisher system for $130,000 from MTI Systems. The fire extinguisher system had an estimated life of 15 years and residual value of $2,800. Seto paid $4,500 for shipping and insurance, and hired an engineering company to install and set up the fire extinguisher system for $12,500. MTI asked for $80,000 cash payment upon purchase, $10,000 is due on July 31, 2014, with a 2% discount if Seto makes the payment by July 10, and a $40,000 one-year note payable plus 6% interest due on June 30, 2015. Seto paid the invoice on July 31. Seto uses the straight-line depreciation method.
On January 1, 2016, Seto replaced a valve component costing $38,700, and as a result, the useful life of the fire extinguisher system increased by 3 years.
On September 3, 2017, the fire extinguisher system was destroyed by a factory fire. Seto made a claim to the insurance company. Subsequently, Seto received $125,000 cash on September 30, 2017.
1. Calculate the acquisition cost of the fire extinguisher system.
2. Prepare all journal entries for 2014, 2015, 2016, and 2017.

View Solution:

Sale on SolutionInn
  • CreatedJuly 08, 2015
  • Files Included
Post your question