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, $2,600; sales tax paid $2,900; and installation cost, $3,100. The cost recorded for the equipment was:

Answer 1

The cost at which the purchased equipment is being recorded but ignoring the sales tax is equivalent to $57,700.

What is the purchase cost?

Purchase cost is the value at which the fixed asset is acquired by the company along with other related expenditures.

The purchase cost of equipment can be determined as follows:

Type of costs                     Amount

1) Purchase cost                  $52,000

2) Cost of installation             3,100

3) Cost of transportation       2,600  

Total costs                            $57,700

Therefore, $57,700 is the total cost of the equipment being acquired by a company except for the sales tax amount which is being paid by the sellers.

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