Calculate the equipment total cost at acquisition

Reference no: EM132834991

Question - On July 1, 2021, STS Inc. acquires a piece of equipment at $230,000 to manufacture product A. It paid $4,000 for shipping and $3,500 for installation of the equipment. Testing fees amounted to $4,500. The company was able to sell some of the output produced during the testing for $600. It also had to repair one part of the equipment that was damaged during the testing, which cost $1,000.

The equipment's useful life is 10 years or 400,000 units of product A. Its residual value is $35,000. It produced 800 units in 2021, 3,000 units in 2022 and 4,500 units in 2023. The units of production method is to be used for depreciation.

Required -

1) Calculate the equipment total cost at acquisition.

2) The equipment was sold on December 31, 2023 for $230,000 cash. Prepare the journal entry to record the sale.

Reference no: EM132834991

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