ACCA Applied Knowledge · Financial Accounting · General ledger accounts and journal entries
Brindle Co bought a machine for $50,000 plus delivery of $2,000, installation of $3,000 and staff training of $1,500. It also paid $800 to repair the machine after a minor breakdown in its first month. What amount should be debited to the machine's cost account?
The machine's cost is $55,000, being the purchase price, delivery and installation. Training costs and the later repair are revenue expenses and not part of the asset's cost. Including training would give $56,500, which is incorrect.
- A$55,000Correct
- B$56,500
- C$57,300
- D$52,000
Explanation
Cost includes purchase price, delivery and installation: 50,000 + 2,000 + 3,000 = $55,000. Staff training and later repairs are expensed. $56,500 wrongly includes training; $57,300 includes both training and repair; $52,000 omits installation.
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