Staley Enterprises purchased a machine for $260,000.The seller paid $900 freight to deliver the machine.Staley used $4,600 of staff mechanics' time to install the machine and employee training cost $7,000.The state charged a 5% sales tax on the invoice price.What is the capitalized cost of the machine?

Question

Quizplus · Accepted Answer

The capitalized cost of the machine includes the purchase price, freight charges, installation costs, and sales tax. The calculation is as follows: Purchase price = $260,000, Freight = $900, Installation = $4,600, Sales tax = 5% of $260,000 = $13,000. Total capitalized cost = $260,000 + $900 + $4,600 + $13,000 = $278,500. However, the employee training cost is not capitalized as part of the machine's cost. Therefore, the correct calculation excluding the training cost is $260,000 + $900 + $4,600 + $13,000 = $278,500. It appears there was a mistake in the provided options and explanation, as none of the options correctly match the calculated total of $278,500, and the explanation mistakenly identified option D as correct without the correct total. The correct approach to find the capitalized cost did not match any of the provided options accurately.

Staley Enterprises Purchased a Machine for $260,000