Reference no: EM132776891
TABACHINGCHING INC constructs equipment for its own use. The account below is for a manufacturing equipment it had assembled in 2017:
DEBIT CREDIT
Cost of dismantling old equipment 21,720
Cash proceeds from sale of oldequipment 18,000
Raw materials used in construction of new equipment 114,000
Labor in construction of new machine 73,500
Cost of installation 16,800
Cost of testing the equipment 12,500
Materials spoiled in machine trial runs 3,600
Profit on construction 36,000
An analysis of the details in the account disclosed the following:
- The old equipment, which was removed before the installation of the new one, had been fully depreciated.
- Cash discount received on the payments for materials used in the construction totalling P4,500 were reported in the purchase discounts account.
- The factory overhead shows a balance of P438,000 for the year ended December 31, 2017; this balance exceeds the normal overhead on regular plant activities by approximately P25,350 and is attributable to equipment construction.
- A profit was recognized on construction for the difference between costs incurred and the price at which these equipment could have been purchased.
- While testing the equipment, sample items were produced. These were sold for P2,500 which was credited to miscellaneous revenue.
Problem 1. What is the total cost of the new equipment?