On january 2, novation corp. replaced its boiler with a more efficient one. the following information was available on that date: purchase price of new boiler $120,000 carrying amount of old boiler 10,000 fair value of old boiler 4,000 installation cost of new boiler 16,000 the old boiler was sold for $4,000. what amount should novation capitalize as the cost of the new boiler?

$136,000

Explanation:

Purchase price of new boiler = $120,000

Carrying amount of old boiler = $10,000

Fair value of old boiler = $4,000

Installation cost of new boiler = $16,000

The selling cost of old boiler = $4,000

Now,

Capitalized cost of the new boiler

= Purchase price of the new boiler + Installation cost the new boiler

= $120,000 + $16,000

= $136,000

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