Determining the Cost of an Asset. Keystone, Inc., replaced its truck-and-dolley system of moving inventory around its plant with a computer-controlled conveyor system. The costs associated with this equipment replacement were as follows:

Purchase price of conveyor system	$1,200,000
Book value of truck-and-dolley system	40,000
Installation cost of new conveyor system	75,000

The truck-and-dolley system was sold for scrap for $60,000. What value should be capitalized to the balance sheet of Keystone, Inc., as the cost basis of the new conveyor system?