Oregon Logging Co. purchased an electronic saw to cut various types and sizes of logs. The saw had a list price of $160,000. The seller agreed to allow a 5 percent discount because Oregon paid cash. Delivery terms were FOB shipping point. Freight cost amounted to $3,200. Oregon had to hire an individual to operate the saw. Oregon had to build a special platform to mount the saw.
The cost of the platform was $2,500. The saw operator was paid an annual salary of $50,000. The cost of the company’s theft insurance policy increased by $1,800 per year as a result of acquiring of the saw. The saw had a five-year useful life and an expected salvage value of $25,000.
a. Determine the amount to be capitalized in an asset account for the purchase of the saw.
b. Record the purchase in general journal format.