Springfield Company purchases new factory equipment.Per the terms of the contract, Springfield must pay the freight charges, will receive a manufacturer's discount off the invoice price on the equipment, and will have some setup expenses to pay. As a result, the acquisition cost of equipment recorded on Springfield's books will be the sum of the invoice price
A)less any discounts, plus transportation costs, installation charges, and any other costs incurred before the equipment is ready for use.
B)less any discounts and transportation costs, plus installation charges and any other costs incurred after the equipment is ready for use.
C)plus transportation costs, installation charges, and any other costs incurred before the equipment is ready for use.
D)less transportation costs, installation charges, and any other costs incurred after the equipment is ready for use.
E)less any discounts and installation charges, plus transportation charges and any other costs incurred after the equipment is ready for use.

Question

Quizplus · Accepted Answer

The acquisition cost of equipment recorded on Springfield's books will be the sum of the invoice price less any discounts, plus transportation costs, installation charges, and any other costs incurred before the equipment is ready for use. This is because the contract specifies that Springfield must pay the freight charges and will receive a manufacturer's discount off the invoice price. Additionally, there are setup expenses to be paid. Therefore, the total cost incurred by Springfield to get the equipment up and running should be added to the invoice price, after subtracting any discounts received.

Springfield Company Purchases New Factory Equipment