Timber Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list
Question:
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.
Required
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.
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...
Step by Step Answer:
Fundamental financial accounting concepts
ISBN: 978-0078025365
8th edition
Authors: Thomas P. Edmonds, Frances M. Mcnair, Philip R. Olds, Edward