Marburg Mfg. Company purchased a machine on January 2, 2011. The invoice price o
ID: 2436048 • Letter: M
Question
Marburg Mfg. Company purchased a machine on January 2, 2011. The invoice price of the machine was $40,000, and the vendor offered a 2 percent discount for payment within ten days. The following additional costs were incurred in connection with the machine:Transportation-in $1,200
Installation cost $700
Testing costs prior to regular operation $550
If the invoice is paid within the discount period, Marburg should record the acquistion cost of the machine at:
A. $41,650
B. $41,100
C. $40,400
D. $39,200
I believe the answer is A. ($41,650), but I am unsure if Transportation-in costs are the same as freight? Should they be included?
Explanation / Answer
Transportation-in costsor freight-in costs are part of the goods purchased. Since he allowed a 2% if paid in 10days, the invoive price is $40,000 * 0.02 = $800 Therefore, the discount is deducted from the actual price of the machine. New price = $40,000 - $800 = $39,200 Calculating the acquisition cost : Transportation-in cost $1,200 installation cost $700 ----------------------------------------------------- Total acquisition cost $41,100