Practice prompt · Q:tangible-asset-acquisition-capitalization-and-resources/initial-cost-001

Separate machine cost from period cost

Classify supplied acquisition expenditures by their role in bringing one machine to intended use readiness.

Updated Sep 10, 2026 Review due Nov 8, 2026

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Northstar pays $510,000 for a machine, $14,000 for freight, $21,000 for installation, $9,000 for operator training, and $6,000 to repair abnormal shipping damage. The facts state that freight and installation prepare the machine for use. Training and abnormal damage are period costs. Which schedule applies those roles and reconciles all $560,000?

Choose the best answer. A $510,000 price, $14,000 freight, and $21,000 installation; exclude $9,000 training and $6,000 abnormal damage repair. B Capitalize all $560,000 because every amount appears in the acquisition file. C Expense all $560,000 because Cash decreased during the period. D Capitalize only the $510,000 price because no other amount can enter asset cost.

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Answer: A

Choice A gives Northstar a $545,000 initial machine cost and $15,000 of period costs. The two amounts reconcile to the $560,000 expenditure population.