Question

Ayayai 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 2020.

Purchase
Cash paid for equipment, including sales tax of $6,700		$140,700
Freight and insurance cost while in transit		2,680
Cost of moving equipment into place at factory		4,154
Wage cost for technicians to test equipment		5,360
Insurance premium paid during first year of operation on this equipment		2,010
Special plumbing fixtures required for new equipment		10,720
Repair cost incurred in first year of operations related to this equipment		1,742
Construction
Material and purchased parts (gross cost $268,000; failed to take 2% cash discount)		$268,000
Imputed interest on funds used during construction (stock financing)		18,760
Labor costs		254,600
Allocated overhead costs (fixed-$26,800; variable-$40,200)		67,000
Profit on self-construction		40,200
Cost of installing equipment		5,896

Compute the total cost to be capitalized for each of these two pieces of equipment.

Purchase equipment		$enter a dollar amount
Construction equipment		$enter a dollar amount

Answer 1

Answer
Purchase equipment	$        163,614
Construction equipment	$        590,136
Explanation
Purchase equipment
	$
Cash paid for equipment, including sales tax of $6,700	$        140,700
Freight and insurance while in transit	$            2,680
Cost of moving equipment into place at factory	$            4,154
Wage cost for technicians to test equipment	$            5,360
Special plumbing fixtures required for new equipment	$          10,720
Total cost	$        163,614
Construction equipment
	$
Material and purchased parts ($268,000 × 0.98)	$        262,640
Labor costs	$        254,600
Overhead costs	$          67,000
Cost of installing equipment	$            5,896
Total cost	$        590,136