Question

Worthington Chandler Company purchased equipment for $12,000. Sales tax on the purchase was $800.
Other costs incurred were freight charges of $200, repairs of $350 for damage during installation, and installation costs of $225.

What is the cost of the equipment?
a. $12,000
b. $12,800
c. $13,225
d. $13,575

Answer 1

Answer:

d. $13,575

Explanation:

The entirety of the costs incurred during the purchase of the asset, that are used to make it functional are generally capitalized. This involves the freight expense paid to bring the asset to the premises of operation, the installation costs and all other costs that are paid for the asset to be functional and hence a total of $13,575 are capitalized in this case.

Total cost of equipment = 12,000 + 800 + 200 + 350 + 225 = $13,575

Hope that helps.