Question

Kathy's Blooms purchased a delivery van with a $60,000 list price. The company was given a $6,000 cash discount by the dealer, and paid $3,000 sales tax. Annual insurance on the van is $1,500. As a result of the purchase, by how much will Kathy's Blooms increase its van account?

Group of answer choices

A. $60,000

B. $54,000

C. $58,500

D. $57,000

Answer 1

Option D ($57,000)

Whenever any asset is purchased, the cost of the asset is not the value of the asset but also the expenses incurred to bring the asset to it's present location and condition where it can be put to use for the intended purpose.

Calculation of increase in Van account:-

List Price = $60,000

Less: Cash discount = ($6,000)

Add: Sales Tax = $3,000

Total Increase in Van account    = $57,000

Note:- Annual insurance is a revenue cost and will not be included in cost.