Anchor Company purchased a manufacturing machine with a list price of $160,000 and received a 2% cash discount on the purchase. The machine was delivered under terms Free On Board shipping point, and freight costs amounted to $2,400. Anchor paid $3,000 to have the machine installed and tested. Insurance costs to protect the asset from fire and theft amounted to $3,600 for the first year of operations. Based on this information, the amount of cost recorded in the asset account would be:
A) $156,800.
B) $159,200.
C) $165,800.
D) $162,200.

Question

Quizplus · Accepted Answer

List Price = $160,000
Cash Discount = 2% of $160,000 = $3,200
Net cost of machine = $160,000 - $3,200 = $156,800
Add Freight = $156,800 + $2,400 = $159,200
Add Installation Costs = $159,200 + $3,000 = $162,200
Add Insurance Costs = $162,200 + $3,600 = $165,800
Therefore, the cost recorded in the asset account would be $165,800.

Anchor Company Purchased a Manufacturing Machine with a List Price