Question

T/F

16. An accountant must issue a report after completing an engagement to prepare financial statements for a client.

T/F

17. A New York based company, that operates only in New York, and is required to collect sales tax on merchandise sold, must also collect sale tax on shipping charges.

T/F

18. Once signed, checks should be mailed by the accounts payable clerk.

T/F

19. Increasing ending inventory lowers a company’s net income.

20. The capitalized cost of equipment should include all of the following except:

a. the purchase price

b. sale tax

c. installation charges

d. delivery charges

e. non of the above

Answer 1

D. None of the above

All the expense which are incurred on the asset before the asset is put to use is capitalized to the cost of the asset.

So, the purchase price, sale tax, installation charges and the delivery charges are incurred before the asset is put to use. So all these expenses will be capitalized to the cost of the asset.

However, if we get the credit of sale tax paid on the asset then it will not form part of the cost of the asset and it will not be capitalized and then the answer would be "b. Sale Tax"