Acquisition Cost On January 1, 2017, Zircon Enterprises purchased a piece of equ

Question

Acquisition Cost On January 1, 2017, Zircon Enterprises purchased a piece of equipment with a list price of $60,000. The following amounts were related to the equipment purchase:

Terms of the purchase were 2/10, net 30. Zircon paid for the purchase on January 8.

Freight costs of $1,000 were incurred.

A state agency required that a pollution control device be installed on the equipment at a cost of $2,500.

During installation, the equipment was damaged and repair costs of $4,000 were incurred.

Architect's fees of $4,500 were paid to redesign the work space to accommodate the new equipment.

Zircon purchased liability insurance to cover possible damage to the asset. The three-year policy cost $8,000.

Zircon financed the purchase with a bank loan. Interest of $3,000 was paid on the loan during 2016.

Required: Determine the acquisition cost of the equipment.

Explanation / Answer

Zircon Enterprises You paid within the discount period so the base amount is: $60,000 X 98% = $58,800 To that you add the: Freight Costs $1,000 Pollution Control $2,500 Architect Fees $4,500 That gives you an acquisition cost of $66,800.

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