Question

A company purchased new equipment for $52,000. The company paid cash for the equipment. Other costs associated with the equipment were: transportation costs, $2,500; sales tax paid $2,800; and installation cost, $1,800. The cost recorded for the equipment was: Multiple Choice $57,300. $52,000. $59,100. $54,500.

Answer 1

The required answer is given below.

$ 59,100

The cost recorded for the equipment was $ 59,100.

The cost of items of PPE i.e new equipment comprises:

1. Purchase price, including import duties, non-refundable purchase taxes, less trade discounts and rebates.
2. Costs directly attributable to bringing the asset to the location and condition necessary for it to be used in a manner intended by management.

As per above definitions, transportation costs, sales tax paid and installation costs should be added to the purchased price of new equipment.

Now Cost of New equipment = $ 52,000+ $ 2,500 + $ 2,800 + $1,800

= $ 59,100

Note:- we have assumed that sales tax paid is non- refundable.