Solution-Calculate the acquisition cost of the gizmo machine

Calculate the acquisition cost of the gizmo machine

Assignment Help Financial Accounting

Reference no: EM132499846

Tea Tree Bay Ltd acquires a Gizmo Machine from Jetsons Ltd for the following consideration:

In the books of Tea Tree Bay Ltd the land is recorded at its cost of $100 000. It has a fair value of $40,000.
In the books of Tea Tree Bay Ltd the equipment is recorded at a cost of $50000. The equipment has an accumulated depreciation balance of $20000.
The fair value of the equipment is $23000 Tea Tree Bayr Ltd also agrees to assume the liability ofletsons Ltd '5
Assumption bank loan of $30 000 as part of the Giarno Machine acquisition. of liability Tea Tree Bay Ltd also spend $50.10 as the installation cost.
Testing cost was $2500. Transportation cost for the machine was $700.
During ?rst year of operation, the company paid $650 as the maintenance cost for the machine.

REQUIRED

Question (a) Calculate the acquisition cost of the Gizmo Machine that will be used as the base for future depreciation charge.

Question (b) Provide the journal entries that would appear in Tea Tree Bay Ltd's books to account for the acquisition of the Giamo Machine

Question (c) Will the maintenance cost be included in me acquisition cost of the machine? Justify your answer.

Reference no: EM132499846

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Calculate the acquisition cost of the gizmo machine

Reference no: EM132499846

Reference no: EM132499846

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