Question

On March 1, Wright Company purchased new equipment for $60,000 by paying cash. Other costs associated...

On March 1, Wright Company purchased new equipment for $60,000 by paying cash. Other costs associated with the equipment were: transportation costs, $3,000; sales tax paid $5,000; and installation cost, $4,500. At what amount will the equipment be recorded on a balance sheet?

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Answer #1

Answer:

The equipment will be recorded at $ 72,500.

Calculation:

Equipment purchase cost $ 60,000.00
Add: Transportation cost $   3,000.00
Add: Sales tax payment $   5,000.00
Add: Installation cost $   4,500.00
Total equipment cost $ 72,500.00

Note:

Transportation cost has been assumed before installing the equipment. Hence, all the costs before equipment is put to use will be part of the cost of equipment.

In case of any doubt, please feel free to comment.

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