Oregon Logging Co. purchased an electronic saw to cut various types and sizes of logs. The saw

Question:

Oregon 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 Oregon paid cash. Delivery terms were FOB shipping point. Freight cost amounted to $3,200. Oregon had to hire an individual to operate the saw. Oregon 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.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...