Purchase and Self-Constructed Cost of Assets-ACCOUNTING?
Dane Co. both purchases and constructs various equipment it uses in its operations. The following items for two different types of equipment were recorded in random order during the calendar year 2011.
PURCHASE
Cash paid for equipment, including sales tax of ,700 3,700
Freight and insurance cost while in transit 3,880
Cost of moving equipment into place at factory 6,014
Wage cost for technicians to test equipment 7,760
Insurance premium paid during first year of operation on this equipment2,910
Special plumbing fixtures required for new equipment15,520
Repair cost incurred in first year of operations related to this equipment2,522
CONSTRUCTION
Material and purchased parts (gross cost 8,000; failed to take 2% cash discount)8,000
Imputed interest on funds used during construction (stock financing)27,160
Labor costs368,600
Allocated overhead costs (fixed–,000; variable–,000)50,000
Profit on self-construction58,200
Cost of installing equipment8,536
Compute the total cost for each of these two pieces of equipment.
Purchase equipment$
Construct equipment$
[affmage source="ebay" results="20"]excavator[/affmage]
I’ve left in the amounts that should be included with each cost.
PURCHASE
Cash paid for equipment, including sales tax of $9,700 $203,700
Freight and insurance cost while in transit 3,880
Cost of moving equipment into place at factory 6,014
Wage cost for technicians to test equipment 7,760
Special plumbing fixtures required for new equipment 15,520
Total Cost = $236,874
CONSTRUCTION
Material and purchased parts (gross cost $388,000; failed to take 2% cash discount) $388,000
Labor costs 368,600
Allocated overhead costs (fixed–$20,000; variable–$30,000) 50,000
Cost of installing equipment 8,536
Total Cost = $815,136