Question

kegler bowling buys scorekeeping equipment with an invoice cost of $160,000. the electrical work required for the installation costs $16,800. additional costs are $3,360 for delivery and $11,530 for sales tax. during the installation, the equipment was damaged and the cost of repair was $1,550. required: indicate whether each cost should be included in the cost of the equipment or excluded and expensed as incurred.

Explanation:

Step1: Determine invoice cost

The invoice cost is the purchase - price of the equipment and is a necessary cost to acquire the asset, so it is included.

Step2: Determine installation electrical work cost

The electrical work for installation is a cost directly related to getting the equipment ready for use, so it is included.

Step3: Determine delivery cost

Delivery costs are necessary to transport the equipment to its place of use, so it is included.

Step4: Determine sales tax cost

Sales tax is a cost incurred in the acquisition of the equipment, so it is included.

Step5: Determine repair cost

The repair cost during installation is not a cost that is necessary to get the equipment in its intended condition for use. It is an abnormal cost and should be expensed as incurred, so it is excluded.

Step6: Calculate total recorded cost

Add the included costs: $160000 + 16800+3360 + 11530=\$191690$

Answer:

Costs	Amount	Included or Excluded	Account
Electrical work required for installation	$16,800	Included	Equipment
Delivery costs	$3,360	Included	Equipment
Sales tax	$11,530	Included	Equipment
Repair costs	$1,550	Excluded	Repairs Expense
Total recorded cost	$191,690	-	-