1)Suppose Central Machine Tools purchased an industrial lathe to


Question Description:

30

1)Suppose Central Machine Tools purchased an industrial lathe to be used in its manufacturing process. The purchase price was $62,000. Central paid a freight company $1,000 to transport the machine to its plant location plus $300 shipping insurance. In addition, the machine had to be installed and mounted on a special platform built specifically for the machine at a cost of $1,200. After installation, several trial runs were made to ensure proper operation. The cost of these trials including wasted materials was $600. At what amount should Central capitalize the lathe? Show the calculation 2) The Astro Corporation develops computer software graphics programs for sale. A new development project begun in 2008 reached technological feasibility at the end of June 2009, and the product was available for release to customers early in 2010. Development costs incurred in 2009 prior to June 30 were $1,200,000 and costs incurred from June 30 to the product availability date were $800,000. 2010 revenues from the sale of the new product were $3,000,000 and the company anticipates an additional $7,000,000 in revenues. The economic life of the software is estimated at four years. The Astro Corporation develops computer software graphics programs for sale. A new development project begun in 2008 reached technological feasibility at the end of June 2009, and the product was available for release to customers early in 2010. Development costs incurred in 2009 prior to June 30 were $1,200,000 and costs incurred from June 30 to the product availability date were $800,000. 2010 revenues from the sale of the new product were $3,000,000 and the company anticipates an additional $7,000,000 in revenues. The economic life of the software is estimated at four years.(record all journal entries)

Answer

30