On January 2, 2020, Holliwell Inc $\$ 36,000$ Carrying Amount of Old Boiler

question 53

Multiple Choice

On January 2, 2020, Holliwell Inc. replaced its boiler with a more efficient one. The following information was available on that date: Purchase price of new boiler....................................... $\$ 36,000$
Carrying amount of old boiler.......................................4,000
Fair value of old boiler.................................................2,400
Installation cost of new boiler......................................3,200

The old boiler was sold for $ 2,400. At what amount should Holliwell capitalize the cost of the new boiler?

• A) $ 42,300
• B) $ 43,200
• C) $ 39,200
• D) $ 40,000

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Definitions:

Input Prices

Refers to the costs associated with the goods and services used in the production of another product, affecting the overall cost of production.

Average Variable Costs

The total variable costs divided by the number of units produced, indicating the average cost of producing each unit excluding fixed costs.

Short-Run Losses

Financial deficits that a firm experiences in the period where at least one factor of production is fixed, leading to an inability to cover total costs.

Operate

The act of functioning or running a business or machine, carrying out actions necessary for performance.