Bart’s Brewskies purchased a new vat for his special brews. He’s paying bills for the following:
Invoice price of the vat: $5,000
Delivery: $500
Maintenance budgeted for the next year: $500
Installation: $300
Specialized concrete base: $200
What is the total cost of the vat for his accounting books?
Explanation
Answer - C - The cost of the vat is $6,000, which includes the invoice price, delivery, installation, and the concrete base.
Key Takeaway: Machinery and equipment costs include not only the purchase price, but any freight and handling charges, insurance on the equipment while being delivered, cost of any foundations, assembly, installation, and the cost of any trial runs. Therefore, all expenses for acquiring the machinery and preparing for its use is included in the cost. Future maintenance is not included.
