In 2021, Diaz Corp. purchased a secondhand machine at a price of P300,000. A cash down payment of P50,000 was made and a two-year, noninterest bearing note was issued for the balance. Recent transactions involving similar machinery indicate that the used machine has a secondhand market value of P240,000. A new machine would cost P400,000.

The following costs were incurred on the machine during the year:

Determine the amount to be capitalized as cost of the machine.

Transcribed Image Text:

P2,000 1,200 Cost of removing the old machine Cash proceeds from the sale of the old machine General overhaul and repair to recondition the machine prior to use Cost of spare parts purchased and set aside for breakdowns during the first two years of normal use of the machine 10,000 20,000 4,000 1,800 Cost of labor to install the machine Cost of the testing the machine prior to use Cost of hauling the machine from the vendor's place of business to the Company's premises Cost of repairing the damage to the machine when it was dropped during installation Repairs incurred during the first year of operations Safety devices added to the machine to comply with the terms of the collective bargaining agreement entered into with the employees' union Cost of training workers to operate the machine 5,000 3,000 6,000 12,000 1,500 P2,000 1,200 Cost of removing the old machine Cash proceeds from the sale of the old machine General overhaul and repair to recondition the machine prior to use Cost of spare parts purchased and set aside for breakdowns during the first two years of normal use of the machine 10,000 20,000 4,000 1,800 Cost of labor to install the machine Cost of the testing the machine prior to use Cost of hauling the machine from the vendor's place of business to the Company's premises Cost of repairing the damage to the machine when it was dropped during installation Repairs incurred during the first year of operations Safety devices added to the machine to comply with the terms of the collective bargaining agreement entered into with the employees' union Cost of training workers to operate the machine 5,000 3,000 6,000 12,000 1,500

Answer rating: 100% (QA)

Answer Step by Step Explanation Capitalized cost of an asset includes those costs ... View the full answer