Ross Company incurs these expenditures in purchasing a truck: cash price $25,000, accident insurance (during use) $2,000, sales taxes $1,080, motor vehicle license $400, and painting and lettering $2,800. What is the cost of the truck?
This is not correct -The expense should include the painting and lettering
The total cost is 27,800? Please advise. Am I correct?
1 Ross Company incurs these expenditures in purchasing a truck: cash price $25,000, accident insurance (during use) $2,000, sales taxes $1,080, motor vehicle license $400, and painting and lettering $2,800. What is the cost of the truck?
Expert Answer
Answer:
Cost of Truck include following expenditure:
Cash Price $25,000
Sales tax $1,080
Total cost is $ 26,080.
Ross company should not include the expenses related to accident insurance, motor vehicle license and painting and lettering in cost of the truck by capitalizing the same as they are expensed in the period in which they are incurred.
Therefore the cost of truck in cash price and sales tax being paid in acquiring the truck by the Ross company.
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