CZ purchased a new machine on June 1. A $1,200 down payment was made. In addition, four monthly payments of $4,000 each are to be made starting July 1. The cash price would have been $14,400. Installation costs of $200 also were incurred. The amount capitalized as the cost of the machine is:

Question

Quizplus · Accepted Answer

The cost to be capitalized as the cost of the machine includes the cash price plus any additional costs incurred to get the machine ready for use.

Cash price = $14,400 
Down payment = $1,200 
Monthly payments = 4 x $4,000 = $16,000 
Installation costs = $200

Total cost to be capitalized = $14,400 + $1,200 + $16,000 + $200 = $31,800

Therefore, choice D ($14,600) is the correct answer as it is the cost after subtracting the down payment and installation costs from the total cost to be capitalized.

CZ Purchased a New Machine on June 1