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Your company buys a computer system for $3 million and pays the vendor $200,000 to install the computer system. Your company should record: A. $3.2 million as expenses. B. $2.8 million as equipment and
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Your company buys a computer system for $3 million and pays the vendor $200,000 to install the computer system. Your company should record: A. $3.2 million as expenses. B. $2.8 million as equipment and the rest as expenses. C. $3.2 million as equipment. D. $3 million as equipment and $200,000 as expenses.

User Steve Jiang
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1 Answer

13 votes
13 votes

Answer:

Your company should record:

C. $3.2 million as equipment.

Step-by-step explanation:

a) Data and Calculations:

Cost of computer system = $3 million

Installation cost = $200,000

Total equipment cost = $3.2 million

b) The cost of installation, which helps to bring the computer system into its intended use, forms part of the equipment cost. Therefore, to record the asset in the books of the company, the sum of $3.2 million will be recorded as equipment. There are no expenses for the equipment at this time.

User Olegst
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