Salvia Company recently purchased a truck.The price negotiated with the dealer was $40,000.Salvia also paid sales tax of $2,000 on the purchase,shipping and preparation costs of $3,000,and insurance for the first year of operation of $4,000.At what amount should the truck be recorded on the balance sheet prior to recording depreciation expense?

Question

Quizplus · Accepted Answer

The truck should be recorded at $45,000 on the balance sheet. This includes the purchase price of $40,000, sales tax of $2,000, and shipping and preparation costs of $3,000. The insurance for the first year of operation is not included in the asset's cost as it is considered an operational expense.

Salvia Company Recently Purchased a Truck