On August 28, 2010, Ruggle Drilling Services purchased a machine with a contract price of $400, 000 and cash terms of 2/10, n/30.The company paid $8, 000 in transportation costs and $8, 000 for installation.Sales taxes of $22, 000 were paid on the invoice amount.The machine should be recorded as a plant asset in the amount of

Question

Quizplus · Accepted Answer

The machine should be recorded at its total cost, which includes the purchase price minus any discounts, plus transportation, installation, and sales taxes. The discount is $8,000 (2% of $400,000), so the net purchase price is $392,000. Adding transportation ($8,000), installation ($8,000), and sales taxes ($22,000) gives a total of $430,000.

On August 28, 2010, Ruggle Drilling Services Purchased a Machine