A spray machine was purchased on October 1, 20x7. The cost of the machine was $165,000. The terms of the agreement were fob destination and the shipping costs were $3,000. The area of the building in which this machine was located had to be specially ventilated and partitioned to control fumes and dust. The cost of the building refurbishing was $35,000. The company used their own maintenance employees to complete the job as part of their regular work schedule, and their cost of the refurbishing was an additional $12,000. The machine had an eight-year life with a salvage value of $20,000. The company paid cash to have the building refurbished, signed a note for $125,000 and paid cash for the balance due on the machine.
On November 1, 20x7 a molding machine needed a replacement part. The cost of the part was $8,400, which the company paid for in cash. The purchase price of the machine on November 1, 20x6 was $232,000 and it had an eight-year useful life with a $40,000 salvage value. This part was not expected to increase the useful life of the machine. This part typically breaks down after four years, so the fact that it only lasted one year was a concern. The company can expect to replace this part again in four years or less.