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On February 1, 2010, Consolidated Department Stores purchased the assets of Jackson Department Store for $750,000. Following are the book and fair market values of those assets at the time of acquisition:

-Consolidated should recognize the cost of the equipment as

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Use the following information to answer questions 
On February 1, 2010, Consolidated Department Stores purchased the assets of Jackson Department Store for $750,000. Following are the book and fair market values of those assets at the time of acquisition:
 
-Consolidated should recognize the cost of the equipment as

Quizplus · Accepted Answer

The cost of the equipment should include all expenditures necessary to acquire the equipment and prepare it for its intended use. This typically includes the purchase price, import duties, nonrefundable purchase taxes, transport costs, handling, installation, and setup costs. If the given options were derived from a scenario where these additional costs (such as import duties, transport, handling, installation, and setup) were provided, and their sum along with the purchase price totals $93,750, then this would be the correct cost to recognize for the equipment on the balance sheet.

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