Higher Ltd. purchased a large piece of earth-moving equipment for $5,000,000. The vehicle had six tires, each
Question:
Higher Ltd. purchased a large piece of earth-moving equipment for $5,000,000. The vehicle had six tires, each worth $100,000 and expected to last two years. This is the maximum value that should be allocated to tires. The reminder of the purchase cost, including incremental costs, was attributable 40% to the vehicle body, expected to last 6 years and 60% to the engine, expected to last 4 years. Other costs associated with the machine:
HST, 15% of $5,000,000 cost ................................................................... $750,000
Delivery ...................................................................................................... 12,200
Repair of incidental damage done during delivery ............................. 5,000
Servicing and tune-up to get the machine ready to use ..................... 14,000
Required:
Prepare the journal entry to record the equipment and the associated expenditures. Record all items on the list plus the $5,000,000 invoice price.
Step by Step Answer:
Intermediate Accounting Volume 1
ISBN: 9781260306743
7th Edition
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod Dick