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During the current year, Sacrosanct Company purchased a second-hand machine at a price of P3,200,000. A cash payment of P500,000 was made and a two-year

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During the current year, Sacrosanct Company purchased a second-hand machine at a price of P3,200,000. A cash payment of P500,000 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 fair value of P2, 400,000. A new machine would cost P4,000,000. The following costs were incurred during the year: Cost of removing old machine that is replaced Cash proceeds from sale of the old machine 30,000 replaced General overhaul and repairs to recondition 10,000 150,000 machine prior to use Cost of spare parts to cover breakdowns Cost of installation Cost of testing machine prior to use Cost of hauling machine from vendor to entity 200,000 80,000 110,000 10,000 premises Cost of repairing damage to machine caused when machine was dropped during installation Repairs incurred during first year of operations Safety device added to the machine Cost of training workers to operate the machine 30,000 90,000 250,000 20,000 What total amount should be capitalized as cost of the second hand machine? a. 3,000,000 b. 2,750,000 c. 3,200,000 d. 3,800,000

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