On January 1, 2014, RC purchased a machine for capital use. The invoice price was $5,000; terms 2/10, n/31. Provincial sales tax on the invoice price was 4 percent. Other cash payments by RC were: shipping, $250; installation, $500; breaking-in, $100, and $300 for a 3-year insurance policy on the machine. RC paid the invoice on January 15, 2014. The machine account should be debited for:

Question

Quizplus · Accepted Answer

To calculate the total cost of the machine, we need to add the invoice price, sales tax, and other cash payments:
$5,000 (invoice price) + ($5,000 x 4% PST) + $250 (shipping) + $500 (installation) + $100 (breaking-in) + $300 (insurance) = $5,950

Since the invoice was paid within the discount period (2/10, n/31), RC can take advantage of the 2% discount. Therefore, the machine account should be debited for:
$5,950 - ($5,950 x 2%) = $5,841

Rounded to the nearest dollar, the correct answer is C.

On January 1, 2014, RC Purchased a Machine for Capital