Question

Kathy's Blooms purchased a delivery van with a $50,000 list price. The company was given a $5,000 cash discount by the dealer, and paid $2,500 sales tax. Annual insurance on the van is $1,250. As a result of the purchase, by how much will Kathy's Blooms increase its van account?a. $50,000.b. $45,000.c. $48,750.d. $47,500.

Answer 1

d. $47,500

Step-by-step explanation:

The computation of the increase amount to its van account is shown below:

= Delivery Van purchase price - cash discount + sales tax

= $50,000 - $5,000 + $2,500

= 47,500

The annual insurance should not be considered as it is the annual expense, not that expense which is to be charged till the installation date. Hence, all other costs should be considered.