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Question 2 Uncle Bob's Limited (UBL) purchased a large printing press. The invoice cost of the printing press was $5,500,000 but UBL was able to
Question 2 Uncle Bob's Limited (UBL) purchased a large printing press. The invoice cost of the printing press was $5,500,000 but UBL was able to get the price reduced to $5,000,000. The seller provided terms whereby if the entire amount was paid within 30 days a further discount of 3% was available. UBL paid on the 29th day. Transportation of the machine cost UBL $20,000. Insurance while in transit was $15,000. To encourage UBL to purchase another machine, the manufacturer gave UBL a $250,000 discount voucher on its next purchase of a similar machine. Workers were paid $35,000 to install the machine. Start-up and testing costs were $55,000. Unfortunately, during the installation, one of the workers accidentally damaged the machine, and it cost $10,000 to repair the damage. Non-refundable sales taxes paid were $500,000, however, later a sales tax rebate of $50,000 was received relating to this transaction. During installation, part of the plant had to be shut down; lost profit from the shutdown was $150,000. Required: For each expenditure, identify whether it should be included in the cost of the printing press or expensed. Answer: Item Include in cost of printing press Expense Printing press 3% discount Freight in Insurance |Voucher Installation Testing Damages Sales Tax Shutdown Total cost
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