Timber Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list price of $120,000. The seller agreed to allow a 4 percent discount because Timber Milling paid cash. Delivery terms were FOB shipping point. Freight cost amounted to $800. Timber Milling had to hire a consultant to train an employee to operate the loader. The training fee was $1,500. The loader operator is paid an annual salary of $45,000. The cost of the company’s’ theft insurance policy increased by $900 per year as a result of acquiring the loader. The loader had a four-year useful life and an expected salvage value of $6,000.
a. Determine the amount to be capitalized in an asset account for the purchase of the loader.
b. Record the purchase in general journal format.