FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:### Problem 4
The Bay View Restaurant has purchased a new dishwasher for its own use.
#### Required:
Using the following information, determine the proper amount to be capitalized in the asset account Equipment.
- **Invoice price of equipment**: $8,000
- **Cash discount allowed: 2% of invoice**: $160
- **Freight-in paid**: $300
- **Speeding ticket given to our truck driver while the driver was delivering equipment**: $25
- **Installation costs**: $150
- **Sales tax on purchase**: $308
- **Repair of damages due to equipment being dropped off truck**: $200
### Explanation:
To determine the amount to be capitalized, you should consider all necessary expenditures to acquire the asset and prepare it for its intended use. This typically includes the invoice price, minus any discounts, plus freight-in, installation, and sales taxes. Incidental costs like speeding tickets or repairs from mishandling are usually expensed as incurred and not capitalized.
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