Cost of a Tangible Capital Asset}

Lauro Cleaners purchased an automatic dry cleaning machine for \(\$ 145,000\) from TGF Corporation on April 1, 2018. Lauro paid \(\$ 45,000\) in cash and signed a five-year, \(10 \%\) note for \(\$ 100,000\). Lauro will pay interest on the note each year on March 31, beginning in 2019. Transportation charges of \(\$ 3,815\) for the machine were paid by Lauro. Lauro also paid \(\$ 2,400\) for the living expenses of the TGF installation crew. Solvent, necessary to operate the machine, was acquired for \(\$ 1,000\). Of this amount, \(\$ 600\) of the solvent was used to test and adjust the machine.

Required:

1. Compute the cost of the new dry cleaning machine.

2. CONCEPTUAL CONNECTION Explain why you excluded any expenditures from the cost of the dry cleaning machine.

\section*{OBJECTIVE 2 Exercise