The Specialty Lab an engineering firm purchased new machinery in 2009 for a total of $168,500. The Installation cost was $1,350, delivery cost $1,500, and insurance to cover the equipment while it was in transit was $500. The Specialty Lab also received a 2% discount since they paid cash for the equipment at the time of delivery. The technology used in operating the machinery was new to The Specialty Lab. They had to hire an employee that had the experience and expertise to operate the machinery at an annual salary of $65,000.
Required:
1. What amount should be capitalized for this new asset?
2. To calculate the depreciation expense for 2009, what other information do you need? Do you think the company should have gathered this information before purchasing the machinery? Why or why not?