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21 September, 07:18

Great Harvest Bakery purchased bread ovens from New Morning Bakery. New Morning Bakery was closing its bakery business and sold its two-year-old ovens at a discount for $697,000. Great Harvest incurred and paid freight costs of $33,500, and its employees ran special electrical connections to the ovens at a cost of $4,700. Labor costs were $36,300. Unfortunately, one of the ovens was damaged during installation, and repairs cost $4,700. Great Harvest then consumed $870 of bread dough in testing the ovens. It installed safety guards on the ovens at a cost of $1,470 and placed the machines in operation. Prepare a schedule to show the amount at which the ovens should be recorded irn Great Harvest's Equipment account.

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  1. 21 September, 09:16
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    Answer: The answer is given below

    Explanation:

    The schedule showing the amount recorded goes thus:

    Particulars Amount ($)

    Purchase price 697000

    Freight costs 33500

    Electrical connection 4700

    labor costs 36300

    Bread dough used in testing oven

    870

    Safety Guards 1470

    Total cost of equipment = 773840

    The repairs cost 4700 is excluded because it is not a normal cost of the installation, therefore, it should be recorded as an expense in the income statement.
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