Question

tb mc qu. 8-42 (algo) on august 1, red company purchased computer... on august 1, red company purchased computer equipment for $10,100 cash and also gave 100 shares of white common stock that red company held as an investment. the white common stock cost red company $5,000 and on august 1 had a fair value of $4,225. the installation costs for the computer equipment were $710 and shipping costs were $510. what amount should be the total amount debited to the computer equipment account?

Answer 1

The total amount to be debited to the computer equipment account for Red Company is $15,545, which includes the purchase price of the equipment, installation costs, shipping costs, and fair value of the stock given.

Step-by-step explanation:

The question involves determining the total amount to be debited to the computer equipment account. This amount includes the purchase price of the equipment, the cost of any additional expenses related to the acquisition, such as the installation and shipping costs, and the fair value of any non-cash consideration given in the transaction, such as stock.

The costs included are $10,100 for the computer equipment, $710 for installation costs, $510 for shipping costs, and the $4,225 fair value of the 100 shares of White common stock.

Therefore, the total debit to the computer equipment account would be the sum of these expenses:

$10,100 (equipment) + $710 (installation) + $510 (shipping) + $4,225 (fair value of stock) = $15,545.