Question

Jose purchased a delivery van for his business through an online auction. His winning bid for the van was $24,500. In addition, Jose incurred the following expenses before using the van: shipping costs of $650; paint to match the other fleet vehicles at a cost of $1,000; registration costs of $3,200, which included $3,000 of sales tax and a registration fee of $200; wash and detailing for $50; and an engine tune-up for $250. What is Jose's cost basis for the delivery van?

Answer 1

Answer: $29,150

Explanation: Cost basis is the original cost of an asset and while calculating it we have to include business preparation cost such as shipping cost, sales tax and paint in it, therefore :-

cost basis for delivery van = purchase price + shipping cost + paint + sales tax

cost basis for delivery van = $24,500 + $650 + $1,000 + $3000

= $29,150