E10-4b (purchase and self-constructed cost of assets) dade co. both
E10-4B (Purchase and Self-Constructed Cost of Assets) Dade Co. both purchases and constructs various
equipment it uses in its operations. The following items for two different types of equipment were recorded in random order during the calendar year 2014.
Purchase
Cost to hire technicians to test equipment $ 10,000
Cash paid for equipment, including sales tax of $31,000 522,500
Freight and insurance cost while in transit 7,000
Cost of moving equipment into place at factory 2,850
Special electrical wiring required for new equipment 3,200
Repair cost incurred in first year of operations related to this equipment 500
Insurance premium paid during first year of operation on this equipment 1,500
Construction
Cost of installing equipment $ 6,500
Material and purchased parts (gross cost $100,000; failed to take 2% cash discount) 100,000
Labor costs 76,700
Allocated overhead costs (fixed—$11,000; variable—$17,000) 28,000
Imputed interest on funds used during construction (stock financing) 7,500
Profit on self-construction 52,600
Instructions
Compute the total cost for each of these two pieces of equipment. If an item is not capitalized as a cost
of the equipment, indicate how it should be reported.
