Question

Mad Hatter Enterprises purchased new equipment for $360,000, terms f.o.b. shipping point. Other costs connected with the purchase were as follows:

State sales tax	$	28,700
Freight costs		5,100
Insurance while in transit		750
Insurance after equipment placed in service		1,150
Installation costs		1,750
Insurance for the first year of operations		2,150
Testing	$	650

Required:
Determine the capitalized cost of the equipment.

Answer 1

New Equipment Cost	$360,000
State Sales Tax		$28,700
Freight Costs		$5,100
Insurance while in Transit	$750
Installation Costs		$1,750
Cost of Equipment		$396,300
Below 3 costs are of regular nature and incurred after installation
of equipment so these expenses will not be added in equipment cost.
Insurance after equipment placed in Service	$1,150
Insurance for the first year of operations		$2,150
Testing					$650