On August 1, 2020, Chapelle Corp. purchases a new machine. The company makes a $ 7,200 cash down payment, and agrees to pay four monthly instalments of $ 10,800 each, starting September 1, 2020, signing a non-interest-bearing note to this effect. The cash equivalent price of the machine is $ 43,200. As well, Chapelle pays installation costs of $ 1,200. The recorded cost of the machine should be
A) $ 8,400.
B) $ 44,400.
C) $ 50,400.
D) $ 51,600.

Question

Quizplus · Accepted Answer

The recorded cost of the machine includes the cash equivalent price of the machine ($43,200), the down payment ($7,200), and the installation costs ($1,200). Adding these amounts together gives $43,200 + $7,200 + $1,200 = $51,600. However, the down payment is already part of the cash equivalent price, so the correct calculation should exclude the down payment from being added again. Therefore, the correct total cost is the cash equivalent price ($43,200) plus the installation costs ($1,200), which equals $44,400.