RB purchased a machine on January 1, 2014. The invoice price was $1,000, terms 1/10, n/31. Provincial sales tax on the invoice price was 4 percent. Other related cash payments by RB were: shipping, $75, and installation, $100. The invoice was paid on January 23, 2014. The machine account should be debited for:

Question

Quizplus · Accepted Answer

The machine account should be debited for the total cost of acquiring and preparing the machine for use. This includes the invoice price minus any discounts, sales tax, shipping, and installation costs. The invoice price is $1,000, with a 1% discount if paid within 10 days, which RB did not take advantage of. Therefore, the full invoice price is $1,000. The sales tax is 4% of $1,000, which is $40. Shipping is $75, and installation is $100. Adding these amounts: $1,000 + $40 + $75 + $100 = $1,215. However, since the invoice was paid after the discount period, the discount is not applicable, so the correct total is $1,215.

RB Purchased a Machine on January 1, 2014