Smith company purchases equipment for a contract price of $300,000 with terms of 2/10 n 30. They incur sales tax of $18,000 transportation costs of $5,000 and installation costs of $15,000 and uninsured damages of $7,000.
Prepare the entry assuming the company does not take the discount.
A fixed asset's cost should only comprise those costs necessary for its intended use. We make this bifurcation as capital expenditure is not reported on an income statement, but a revenue expense is.
Answer and Explanation: 1
Smith company's entry assuming the company does not take the discount is made below:
The first entry is to recognize the purchases:
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fromChapter 9 / Lesson 4
One of the main categories of long-term assets is known as property, plant, and equipment, encompassing the location, buildings, and equipment needed in production. Learn how the acquisition of property, plant, and equipment is recorded and documented through an example of journaling.