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Jamison Company purchased the assets of Booker Company at an auction for $1,400,000.An independent appraisal of the fair value of the assets is listed below:
-Storm Corporation purchased a new machine on October 31, 2010.A $1,200 down payment was made and three monthly installments of $3,600 each are to be made beginning on November 30, 2010.The cash price would have been $11,600.Storm paid no installation charges under the monthly payment plan but a $200 installation charge would have been incurred with a cash purchase.The amount to be capitalized as the cost of the machine on October 31, 2010 would be

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Use the following information to answer questions 
Jamison Company purchased the assets of Booker Company at an auction for $1,400,000.An independent appraisal of the fair value of the assets is listed below: 
-Storm Corporation purchased a new machine on October 31, 2010.A $1,200 down payment was made and three monthly installments of $3,600 each are to be made beginning on November 30, 2010.The cash price would have been $11,600.Storm paid no installation charges under the monthly payment plan but a $200 installation charge would have been incurred with a cash purchase.The amount to be capitalized as the cost of the machine on October 31, 2010 would be

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The cost of the machine will be the cash price plus any additional costs necessary to get the machine ready for use. In this case, the cash price is $11,600 and there is an installation charge of $200 that would have been incurred with a cash purchase. Therefore, the total cost is $11,800. Since the down payment of $1,200 was made on October 31, 2010, the amount to be capitalized on that date is the remaining balance of $10,600 (3 monthly installments of $3,600 each). Adding the down payment and the remaining balance gives us a total cost of $11,800, which is the amount to be capitalized on October 31, 2010.

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