The inclusion of the 7500 in the machinery account on the

Reference no: EM13596807

The invoice price of a machine is $50,000. Various other costs relating to the acquisition and installation of the machine including transportation, electrical wiring, special base, and so on amount to $7,500. The machine has an estimated life of 10 years, with no residual value at the end of that period.

The owner of the business suggests that the incidental costs of $7,500 be charged to expense immediately for the following reasons.

1. If the machine should be sold, these costs cannot be recovered in the sales price.

2. The inclusion of the $75,00 in the machinery account on the books will not necessarily result in a closer approximation of the market price of this asset over the years, because of the possibility of changing demand and supply levels.

3. Charging the $7,500 to expense immediately will reduce federal income taxes.Discuss each of the points raised by the owner of the business.

Reference no: EM13596807

Questions Cloud

Ivans capital account was credited for 120000 the partners : ivans capital account was credited for 120000. the partners agreed further that the current fair values of the net

When acetaldehyde at a pressure of 364 mmhg is introduced : when acetaldehyde at a pressure of 364 mmhg is introduced into an evacuated 500. ml flask at 518degc the half-life for

Cater right with total assets of 50000 borrows 15000 from : 1 anytime an owner removes any asset for personal use it is recorded as a a withdrawal. b payment of a liability. c an

Matt kifer president of kifer corporation believes that it : matt kifer president of kifer corporation believes that it is a good practice for a company to maintain a constant

The inclusion of the 7500 in the machinery account on the : the invoice price of a machine is 50000. various other costs relating to the acquisition and installation of the

The entry to replenish the petty cash fund debited supplies : 1 robbins supply journal entry to establish a 100 petty cash fund for the office would include a a credit to petty cash

Accounts payable had a normal starting balance of 600 there : 1 which of the following would result if the business provided services to a customer collecting cash? a cash would

Kristen montana operates a retail clothing operation she : kristen montana operates a retail clothing operation. she purchases all merchandise inventory on credit and uses a

Down jackets has three types of costs jacket cost factory : down jackets has three types of costs jacket cost factory rent cost and utilities cost. this company sells its jackets

User Account

All Pages