Question

On August 1, Red Company purchased computer equipment for $10,000 cash and also gave 100 shares of White common stock that Red Company held as an investment. The White common stock cost Red Company $5,000 and on August 1 had a fair value of $4,200. The installation costs for the computer equipment were $700 and shipping costs were $500. What amount should be the total amount debited to the computer equipment account

Answer 1

Answer:

Explanation:

A capitalized cost of an asset is made up of

1 . Purchase price import duties and non refundable taxes less trade discount and rebate

2. Direct cost of bringing the asset to its present position

3. Fair value given in exchange for the the assets

Cost of Computer

Purchase Price -                                $10,000

Fair value of White common stock - $4,200

Installation cost -                                  $  700

Shipping cost -                                      $  500

Total Cost -                                             $15,400