a company purchased new equipment for $60,000. the company paid cash for the equipment. other costs associated with the equipment were: transportation costs, $1,000; sales tax paid $2,000; and installation cost, $2,500. the correct amount to capitalize in the equipment account would be:

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21-10-2022
Business

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a company purchased new equipment for $60,000. the company paid cash for the equipment. other costs associated with the equipment were: transportation costs, $1,000; sales tax paid $2,000; and installation cost, $2,500. the correct amount to capitalize in the equipment account would be:

Answer :

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akankshasharma92 akankshasharma92 · Answer 1 · 2022-10-27T13:28:47-04:00

The amount to capitalize in the equipment account would be: 65,500

According to IAS 16 Property, Plant and Equipment, an asset's cost consists of:

combined with import taxes and duty the first estimate of the costs of dismantling and removing the item and restoring the place on which it is located, as well as any expenses directly related to transferring the asset to the location and condition required for it to be able to operate as intended by management

In the example, the asset cost $60,000 to purchase, $1,000 was needed for delivery to the site desired by management, $2,000 was needed for sales tax, and another $2,500 was needed for installation in order for the asset to operate as intended by management. As a result, all of these expenses would be 65,000

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