Question
In: Finance
Tonga Corporation incurred the following expenditures to purchase a new machine: $100,000 purchase price, $12,000 for...
Tonga Corporation incurred the following expenditures to purchase a new machine: $100,000 purchase price, $12,000 for delivery of the machine, $5,000 for installation and testing of the machine, $4,000 to train staff to run the machine. In addition, the firm paid $2,000 to reinforce the factory floor to support the machine’s weight. They also paid $20,000 to repair the factory roof, extending the life of the factory by 4 years and $10,000 to create office space for the supervisor of the factory area. The capitalized value of the machine on the firm’s books would be closest to
Group of answer choices
A) $117,000
B) $119,000
C) $121,000
D) $137,000
Solutions
Expert Solution
The items to include in the capitalized value are :
- Purchase price
- Delivery
- Installation
- Training cost
These items are included because they are directly attributable to the cost of the machine, and the benefits of these costs are received over the life of the machine.
However, factory repair and office space cost are not included because they are not directly attributable to the cost of the machine.
The capitalized value = $100,000 + $12,000 + $5,000 + $4,000
The capitalized value = $121,000
jeff jeffy answered 2 years agoRelated Solutions
Weir Inc. is considering to purchase of new production machine for $100,000. although the purchase of...
Weir Inc. is considering to purchase of new production machine
for $100,000. although the purchase of this machine will not
produce ny increase in sales revenues , it will result in a
reduction of labor costs by $31,000 per year. the shipping cost is
is $7,000. in addition it would cost $3,000 to install this machine
properly. also because this machine is extremely efficient its
purchase would necessitate an increase in inventory of $25,000.
this machine has an expected life...
Simmons Company is considering the purchase price of a new floor machine. The purchase price of...
Simmons Company is considering the purchase price of a new floor
machine.
The purchase price of the equipment is $420,000 and it is
expected to have a useful life of 7 years with no salvage
value.
The company uses straight line depreciation and pays income
taxes at a rate of 25%.
If the company requires that all new equipment investments pay
for themselves within 3 years, how much annual cash
operating savings must the floor machine generate, if it
is...
A firm is considering the purchase of a new machine at a price of $108,000. The machine...
A firm is considering the purchase of a new machine at a price
of $108,000. The machine falls into the three-year MACRS
class. If the new machine is acquired, the firm's investment in net
working capital will immediately increase by $15,000 and then
remain at that level throughout the life of the project. At the end
of 3 years, the new machine can be sold for $5,000. Earnings before
depreciation, interest and taxes (EBDIT) are expected to be as
follows with...
A firm is considering the purchase of a new machine at a price of $150,000. The machine...
A firm is considering the purchase of a new machine at a price
of $150,000. The machine falls into the three-year MACRS
class. If the new machine is acquired, the firm's investment in net
working capital will immediately increase by $10,000 and then
remain at that level throughout the life of the project. At the end
of 3 years, the new machine can be sold for $16,000. Earnings
before depreciation, interest and taxes (EBDIT) are expected to be
as follows with...
A firm is considering the purchase of a new machine at a price of $120,000. The machine...
A firm is considering the purchase of a new machine at a price
of $120,000. The machine falls into the three-year MACRS
class. If the new machine is acquired, the firm's investment in net
working capital will immediately increase by $15,000 and then
remain at that level throughout the life of the project. At the end
of 3 years, the new machine can be sold for $5,000. Earnings before
depreciation, interest and taxes (EBDIT) are expected to be as
follows with...
A firm is considering the purchase of a new machine at a price of $200,000. The machine...
A firm is considering the purchase of a new machine at a price
of $200,000. The machine falls into the three-year MACRS
class. If the new machine is acquired, the firm's investment in net
working capital will immediately increase by $20,000 and then
remain at that level throughout the life of the project. At the end
of 3 years, the new machine can be sold for $40,000. Earnings
before depreciation, interest and taxes (EBDIT) are expected to be
as follows with...
Rump Industries is considering the purchase of a new production machine for $100,000. The introduction of...
Rump Industries is considering the purchase of a new production
machine for $100,000. The introduction of the machine will result
in an increase in earnings before interest and tax of $25,000 per
year. Set-up of the machine will involve installation costs of
$5,000 after-tax. Additionally, the machine will require workers to
undergo training that will cost the company $5,000 after-tax. An
initial increase in raw materials and inventory of $25,000 will
also be required. The machine has an expected life...
Jordan and Taylor want to purchase a new 60 quart floor mixer for $12,000. This machine...
Jordan and Taylor want to purchase a new 60 quart floor mixer
for $12,000. This machine would have a 5 year life with a salvage
value of $2,000. The new machine would decrease operating costs by
$1,000 each year of its economic life. The straight-line
depreciation method would be used for the new machine. The cost of
capital is 6%.
Before they spend the money, they have asked you to calculate
outcomes with capital investment models.
1. What is the...
Jordan and Taylor want to purchase a new 60 quart floor mixer for $12,000. This machine...
Jordan and Taylor want to purchase a new 60 quart floor mixer for
$12,000. This machine would have a 5 year life with a salvage value
of $2,000. The new machine would decrease operating costs by $1,000
each year of its economic life. The straight-line depreciation
method would be used for the new machine. The cost of capital is
6%. Before they spend the money, they asked Mary to calculate
outcomes with capital investment models. 1. What is the payback...
Oaktree Company purchased new equipment and made the following expenditures: Purchase price $ 50,000 Sales tax...
Oaktree Company purchased new equipment and made the following
expenditures: Purchase price $ 50,000 Sales tax 2,700 Freight
charges for shipment of equipment 750 Insurance on the equipment
for the first year 950 Installation of equipment 1,500 The
equipment, including sales tax, was purchased on open account, with
payment due in 30 days. The other expenditures listed above were
paid in cash. Required: Prepare the necessary journal entries to
record the above expenditures. (If no entry is required for a...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- UNIX ONLY -- DIFFICULT LAB ASSIGNMENT This is an extremely difficult subject for me. Could you...
- Do you know why your credit card can be refused even though you are profitable?
- The Following Java expression: S/10 * 10 + 10 – S = C Show that this...
- Year Cash Flow 0 −$9,700 1 5,800 2 2,500 3 3,400 &nb
- In a two – story building, an exterior column is to be designed for a service...
- Explain the use of neural networking modeling in predictive analytics. Discuss a real-life example of where...
- Boarder line and antisocial disorder are perhaps the most research personality disorder.What are the most common...
ADVERTISEMENT