Question

a company purchased a piece of equipment by paying $5,000 cash. shipping cost of $400 to get the equipment to its factory was also incurred. the fair value of this equipment is $7,000. for what amount should the company record the equipment?

Answer 1

From the given information, The amount should the company record the equipment is $5,400.

A corporation paid $5,000 in cash for a piece of equipment, and another $400 was spent on shipping it to its factory.

This equipment has a $7,000 fair market value.

As a result, the corporation records the equipment at $5,400. (i.e. $5,000+$400)

• After taking into account all associated costs, the corporation records the cost of an asset in its financial statements.

Cost of an asset is made up of the following expenses, which must be recorded in the financial statements are:

• Transport and shipping fees.

• For the installation of an asset, site preparation expenses.

• Extra fee for packing.

• Engineering costs are technical.

• costs before launch.

The fair worth of an asset would not be taken into account because it excludes the costs described above.

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