On January 1, Year 3, Garnet Corporation purchased equipment with a list price o
ID: 2545144 • Letter: O
Question
On January 1, Year 3, Garnet Corporation purchased equipment with a list price of $85,000. The following amounts were related to this purchase
Terms of the credit purchase were 2/10, n/45. Garnet paid for the equipment on January 7.
Freight charges to have the equipment delivered to Garnet's production facility were $2,000.
During installation, the equipment was damaged due to negligence. Repairs cost $5,100.
Before the equipment could be installed, upgrades to the existing electrical system were necessary; these upgrades cost $6,700.
Garnet purchased insurance to cover possible damage to the equipment during use; the three-year policy cost $3,600.
Garnet financed part of the cost of the equipment with a bank loan. Interest on the loan during Year 3 amounted to $1,800.
What amount should Garnet record as the cost of the equipment?
$85,000
$92,000
$95,600
$102,500
none of the above
SHOW ALL WORK
a.$85,000
b.$92,000
c.$95,600
d.$102,500
e.none of the above
Explanation / Answer
All cost incurred for the asset is added to the cost of the assest.
Purchase cost net of 2 % discount = 83300
Fright = 2000
repair cost = 5100
insurance = 3600
Interest = 1800
Electrcial system upgrade = 6700
________________
Total cost = 102500
Option D is correct.