Daniel Manufacturing Limited (DML) purchased a large lathe. The invoice cost of the Iathe was $8.200,.000...
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Daniel Manufacturing Limited (DML) purchased a large lathe. The invoice cost of the Iathe was $8.200,.000 but DML was able to get the price reduced to $5,800,000. The seller provided terms whereby if the entire amount was paid within 30 days a further discount of 3% was available. DML psid on the 25th day. Transportation of the machine cost DML $70.000. Insurance while in transit was $30,000. To encourage DML to purchase another machine, the manufacturer gave DML a $50,000 discount voucher on its next purchase of a similar machine. Workers were paid $45,000 to install the machine. Start-up and testing costs were $45,000. Unfortunately, during the installation, one of the workers accidentally damaged the machine, and it cost $15.000 to repair the damege. Non-refundable sales taxes paid were $700,000, however, later a sales tax rebate of $80,000 was received relating to this transaction. During installation, part of the plant had to be shut down; lost profit from the shutdown was $100,000.1 Required: For each expenditure, identify whether it shouid be included in the cost of the lathe ar expensed. Briefly justifty each of your responses. Answer tem Include In cost of lathe Expense Juatification Lathe 3% discount Freight in insurance Voucher installation resing Damages Sales Tax Shuidown Tatal cost Daniel Manufacturing Limited (DML) purchased a large lathe. The invoice cost of the Iathe was $8.200,.000 but DML was able to get the price reduced to $5,800,000. The seller provided terms whereby if the entire amount was paid within 30 days a further discount of 3% was available. DML psid on the 25th day. Transportation of the machine cost DML $70.000. Insurance while in transit was $30,000. To encourage DML to purchase another machine, the manufacturer gave DML a $50,000 discount voucher on its next purchase of a similar machine. Workers were paid $45,000 to install the machine. Start-up and testing costs were $45,000. Unfortunately, during the installation, one of the workers accidentally damaged the machine, and it cost $15.000 to repair the damege. Non-refundable sales taxes paid were $700,000, however, later a sales tax rebate of $80,000 was received relating to this transaction. During installation, part of the plant had to be shut down; lost profit from the shutdown was $100,000.1 Required: For each expenditure, identify whether it shouid be included in the cost of the lathe ar expensed. Briefly justifty each of your responses. Answer tem Include In cost of lathe Expense Juatification Lathe 3% discount Freight in insurance Voucher installation resing Damages Sales Tax Shuidown Tatal cost
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Related Book For
Financial Accounting: A Business Process Approach
ISBN: 978-0136115274
3rd edition
Authors: Jane L. Reimers
Posted Date:
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