Final answer:
The cost of the truck for Sandhill Co. is $30,356, which includes the cash price, sales taxes, motor vehicle license, and painting and lettering costs. Accident insurance is not included in the cost of the truck as it is considered an operating expense.
Step-by-step explanation:
The cost of the truck for Sandhill Co. involves adding the cash price of the truck and the additional expenditures that are directly related to the acquisition and preparation of the truck for its intended use. This includes the cash price, sales taxes, motor vehicle license fee, and painting and lettering. Accident insurance is a future operating cost and should not be included in the cost of the asset.
The total cost of the truck is therefore calculated as follows:
- Cash price: $26,800
- Sales taxes: $1,206
- Motor vehicle license: $580
- Painting and lettering: $1,770
Add these amounts together to arrive at the total cost.
Total cost of the truck = $26,800 + $1,206 + $580 + $1,770 = $30,356.