A firm purchased an asset with a five-year life for $90,000, and it cost $10,000 for shipping and installation.According to the current tax laws the cost basis of the asset at time of purchase is [blank].
A)$100,000
B)$95,000
C)$80,000
D)$70,000

Question

Quizplus · Accepted Answer

The cost basis of the asset includes the purchase price plus any additional costs necessary to get the asset ready for use, which in this case includes the $10,000 for shipping and installation. Therefore, the total cost basis is $90,000 (purchase price) + $10,000 (additional costs) = $100,000.

A Firm Purchased an Asset with a Five-Year Life for $90,000