John purchases a truck for his hardware business in Utah. The price of the truck is $18,000. The truck is located in Alabama so John must pay $1,000 to ship the truck up to Utah. When John paid the one time registration fee of $500 for the car, he also paid $1,150 of tax to the state of Utah. Three months after John purchased the truck he had to replace the battery at a cost of $100.
What is value that the truck is recorded on John's books?
John is doing hardware business. So truck is an asset not an inventory .
Fixed asset(plant,property,equipment) initially measured according to its historical cost, which is the actual purchase cost and the costs associated with bringing assets to its intended use.
That is ,Value of asset not only the purchase price it includes the shipping charges ,registration fee and also the non refundable taxes.
That is value asset includes all expenses associated to it till it ready for use.
Value of truck
purchase price = $ 18000
Shipping charge = $ 1000
One time registration fee = $ 500
Tax(assume non refundable) = $ 1150
Total value of truck = 18000+1000+500+1150
= $ 20650
Note: the battery changing cost of $ 100 after 3 month will not include the value of truck .it will go to the repairs and maintenance.
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