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.
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