ACY Limited (“ACY”) purchased a specialized machine for its business use for a total price of $3,000,000, paid in cash, on 1 January 20X1. The total price included installation fee of $50,000, which enabled the machine to be immediately available for ACY’s use on 1 January 20X1. This is estimated that the machine has a useful life of 10 years with a residual value up to $200,000. Straight-line depreciation method is adopted. On 1 January 20X1, to help finance the acquisition of this machine, ACY issued a 5-year zero-interest-bearing note, with a face value of $1,000,000, due on 31 December 20X5. The market rate is 8% for notes with similar risks.
Question
What is the total initial costs of the machine on 1 January 20X1?
Question 15Select one:
A.
$3,045,372
B.
$4,000,000
C.
$3,680,583
D.
$3,000,000