Question

Erin Danielle Company purchased equipment and incurred the following costs:

Cash price: $24,000
Sales taxes: 1,200
Insurance during transit: 200
Installation and testing: 400
Total costs: $25,800
What amount should be recorded as the cost of the equipment?

Answer 1

The cost of the equipment for the Erin Danielle Company should include all expenses necessary for its acquisition and preparation for use, totaling $25,800.

Step-by-step explanation:

The cost of the equipment that should be recorded by Erin Danielle Company includes all the expenditures necessary to acquire the equipment and prepare it for use. Therefore, the cost of the equipment will include the cash price, sales taxes, insurance during transit, and installation and testing costs. The total amount that should be recorded for the equipment is $25,800, which is the sum of all these individual costs:

• Cash price: $24,000
• Sales taxes: $1,200
• Insurance during transit: $200
• Installation and testing: $400
• Total costs: $25,800

It's important to include all these applicable costs when recording the purchase of equipment to ensure the asset is properly stated in the company's financial statements.