Reference no: EM131216853
Asset Measurement Assume that Jennifer's Juice (JJ), an organic food retailer in the United States, recently purchased a new refrigeration system for its Chapel Hill, North Carolina, store. JJ paid $1.3 million for the refrigeration unit and paid an additional $120,000 to modify the unit to meet its specific needs. JJ paid $55,000 for the transportation and installation of the unit, plus $48,000 for an annual insurance premium for the first year, which begins next month. Finally, assume that JJ hired a refrigeration technician, who is charged with the maintenance of the unit; that technician's annual salary is $80,000. How much should JJ record as the acquisition cost of the refrigeration unit and what is the treatment of any of the above amounts that you did not include in the acquisition cost of the unit?
Choose one:
a. The acquisition cost is $1,475,000. The insurance premium and salary are expenses on the income statement.
b. The acquisition cost is $1,475,000. The insurance premium is a prepaid asset on the balance sheet and the salary is an expense on the income statement.
c. All the costs are acquisition costs and total $1,603,000.
d. The acquisition costs are all costs except for the salary and total $1,523,000. The salary is an expense on the income statement.
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