Question

Roosevelt Manufacturing recently purchased a new piece of equipment. The equipment was originally listed at a price of $45,000, but Roosevelt negotiated the invoice price down to $40,000. In addition to the invoice price, Roosevelt paid sales tax of $2,000 on the purchase, costs to have the equipment shipped and installed at Roosevelt’s warehouse of $5,000, and insurance for the first year of operation of $4,000. What amount should Roosevelt capitalize on the balance sheet related to the equipment purchase?
Group of answer choices$56,000
$52,000
$51,000
$47,000

Answer 1

Answer -

$ 51,000

Explanation -

Invoice price = $ 40,000

Add - sales tax = $ 2,000

Add - Shipping cost = $ 5,000

Add - Insurance cost = $ 4,000

Total cost of equipment = $ 51,000

As insurance is paid at time of purchase so that cost is capitailised as to make ready for use of asset. Whenever Equipment purchase all the invoice cost, taxes paid, shipping cost and insurance costs are all capitalised as these costs are incurred to make the asset ready for use .