Purchase And Self-Constructed Cost Of Assets

Purchase And Self-Constructed Cost Of Assets

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E10-4B (Purchase and Self-Constructed Cost of Assets) Dade 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 2014.

Purchase

Cost to hire technicians to test equipment                                                                              $ 10,000

Cash paid for equipment, including sales tax of $31,000                                                        522,500

Freight and insurance cost while in transit                                                                                  7,000

Cost of moving equipment into place at factory                                                                           2,850

Special electrical wiring required for new equipment                                                                 3,200

Repair cost incurred in first year of operations related to this equipment                                     500

Insurance premium paid during first year of operation on this equipment                                   1,500

Construction

Cost of installing equipment                                                                                                      $ 6,500

Material and purchased parts (gross cost $100,000; failed to take 2% cash discount)        100,000

Labor costs                                                                                                                               76,700

Allocated overhead costs (fixed—$11,000; variable—$17,000)                                             28,000

Imputed interest on funds used during construction (stock financing)                                      7,500

Profit on self-construction                                                                                                        52,600

Instructions

Compute the total cost for each of these two pieces of equipment. If an item is not capitalized as a cost

of the equipment, indicate how it should be reported.