Southwest Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list price of $115,250. The seller agreed to allow a 6.00 percent discount because Southwest Milling paid cash.

Southwest Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list price of $115,250. The seller agreed to allow a 6.00 percent discount because Southwest Milling paid cash. Delivery terms were FOB shipping point. Freight cost amounted to $2,300. Southwest Milling had to hire a specialist to calibrate the loader. The specialist’s fee was $1,210. The loader operator is paid an annual salary of $18,700. The cost of the company’s theft insurance policy increased by $1,890 per year as a result of acquiring the loader. The loader had a four-year useful life and an expected salvage value of $6,100.

    

Required

a.	Determine the amount to be capitalized in an asset account for the purchase of the loader.    b. Record the purchase in general journal format. Explanation: a.  Discount: $115,250 × 6.00% = $6,915 The operator salary and increase in insurance are operating expenses.