Anchor Company purchased a manufacturing machine with a list price of $80,000 and received a 2% cash discount on the purchase. The machine was delivered under terms FOB shipping point, and freight costs amounted to $1,200. Anchor paid $1,500 to have the machine installed and tested. Insurance costs to protect the asset from fire and theft amounted to $1,800 for the first year of operations. Based on this information, the amount of cost recorded in the asset account would be:
A)$81,100.
B)$79,600.
C)$82,900.
D)$78,400.

Question

Quizplus · Accepted Answer

$80,000 list price - ($80,000 x 2% discount) + $1,200 freight + $1,500 installation and testing = $81,100. The insurance cost is not included in the cost of the machine, but is instead expensed during the first year.

Anchor Company Purchased a Manufacturing Machine with a List Price