Consider the following facts: New equipment was purchased by Company A at a list

Question

Consider the following facts:

New equipment was purchased by Company A at a list price of $98,000, with credit terms of 2/10, n/30. Payment was made within the discount period and included $7,840 sales tax, in addition to the net purchase price.

Company A also paid delivery charges of $990 and labor costs of $1,500 for installing the new equipment at the appropriate location.

During installation, an inexperienced employee punctured several containers with a forklift, causing damage to the equipment.

Cost to repair the damage was $2,460. What is the total cost of Company A's equipment?

a. $108,330

b. $103,910

c. $108,830

d. $106,370

e. None of these answers are correct

Explanation / Answer

Purchase price = $98,000

Less: Discount on purchase = $1,960 ($98,000*2/100)

Add: Sales tax = $7,840

Add: Installation charges = $2,490 ($990 + $1,500)

Add: Cost to damage = $2,460

Totak cost of equipment = $108,830

Therefore, option c is correct.

Note: Generally the damages costs are not included in the total cost of assets but the damage is happend during the installation so it included.

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