On March 1, Wright Company purchased new equipment for $50,000 by paying cash. Other costs associated with the equipment were: transportation costs, $1,000; sales tax paid $4,000; and installation cost, $2,500. At what amount will the equipment be recorded on a balance sheet

Question

Business

Peep

28 January, 17:34

On March 1, Wright Company purchased new equipment for $50,000 by paying cash. Other costs associated with the equipment were: transportation costs, $1,000; sales tax paid $4,000; and installation cost, $2,500. At what amount will the equipment be recorded on a balance sheet

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Sheldon Barker · Answer 1

Equipment amount recorded is $57,500

Explanation:

When a new equipment is purchased by a business the cost that eventually gets recorded as the book value of the asset will include all costs incurred during the purchase. Costs included are transportation costs, installation cost, initial maintenance, and taxes paid.

In this instance the equipment amount = Price of equipment + Transportation cost + Installation cost + Sales Tax

Equipment amount = 50,000 + 1,000 + 4,000 + 2,500

Equipment amount = $57,500