A company purchased office equipment for $24,500 and paid $1,470 in sales tax,$550 for installation,$3,200 for a needed adjustment to the equipment,and $2,600 for supplies that will be used for periodic routine maintenance.How should the company record this transaction?

Question

Quizplus · Accepted Answer

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.Those costs would include the sales tax,the installation costs,and the needed adjustment.The supplies that will be used for maintenance should not be included in the cost of the equipment.
Debit Equipment for $29,720 (or $24,500 + $1,470 + $550 + $3,200),debit Supplies for $2,600,and credit Cash for $32,320.

A Company Purchased Office Equipment for $24,500 and Paid $1,470