Question

Clutch Company purchased equipment and incurred the following costs as part of the purchase: Purchase price...

Clutch Company purchased equipment and incurred the following costs as part of the purchase: Purchase price $10,000 Transportation costs $500 Repair for damage incurred during installation $250 Installation costs $550 Sales tax $750 What amount should Clutch capitalize as the cost of the equipment?

12,050

11,800

11,000

10,750

Business   Accounting   
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Answer #1

Correct answer---------$12,050

Working

Cost of Equipment $      10,000.00
Add:  
Transportation cost $            500.00
Repair during Installation $            250.00
Installation cost $            550.00
Sales tax $            750.00
Total cost of Equipment $      12,050.00

All costs that are incurred in making the equipment available for its intended use will be capitalized as Equipment cost including repairs during installation.

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