A prefabricated steel storage shed is purchased for $20,000 cash and a $80,000 interest-bearing note payable over a 5-year period at an annual interest rate of 10 percent per annum.The cost to be recorded as an asset (in addition to the $100,000 purchase price) should include all of the following except

Question

Quizplus · Accepted Answer

Although the interest on the note payable is a cost associated with the purchase, it is not included in the cost of the asset. The cost of the asset includes the purchase price of $20,000 and any additional costs directly related to acquiring and preparing the asset for its intended use, such as shipping and handling, insurance, reassembly and installation costs.

A Prefabricated Steel Storage Shed Is Purchased for $20,000 Cash