Tolleson Enterprises buys a computer system for $2,400,000 and pays the vendor $160,000 to install the computer system.Tolleson should record:
A)$2,400,000 as equipment and $160,000 as expenses.
B)$2,560,000 as expenses.
C)$2,240,000 as equipment and the rest as expenses.
D)$2,560,000 as equipment.

Question

Quizplus · Accepted Answer

Equipment cost = $2,400,000 + $160,000 = $2,560,000
The general rule for tangible assets under the cost principle is that all reasonable and necessary costs to acquire and prepare an asset for use should be recorded as a cost of the asset.As a result,the installation costs should be recorded as part of the cost of the equipment rather than as an expense.

Tolleson Enterprises Buys a Computer System for $2,400,000 and Pays