On August 1,Red Company purchased computer equipment for $10,000 cash and also gave 100 shares of White common stock that Red Company held as an investment.The White common stock cost Red Company $5,000 and on August 1 had a fair value of $4,200.The installation costs for the computer equipment were $700 and shipping costs were $500.What amount should be the total amount debited to the computer equipment account?
A)$14,200.
B)$15,000.
C)$15,400.
D)$16,200.

Question

Quizplus · Accepted Answer

The total cost of the computer equipment includes the purchase price ($10,000), installation costs ($700), and shipping costs ($500), which add up to $11,200. In addition, since the White common stock had a fair value of $4,200 instead of the cost of $5,000, there is a loss of $800 ($5,000 - $4,200) that needs to be recognized. Therefore, the total amount debited to the computer equipment account would be $11,200 + $800 = $12,000.

On August 1,Red Company Purchased Computer Equipment for $10,000 Cash