A construction company purchased a piece of equipment with a price of $100,000 on March 1 of the current year. The amounts are related to the equipment purchase. Match the items and explain how each item should be accounted for. (Choices may be used more than once.)
-The cash purchase was made on March 8 with terms of 2/10, net 30.
A)This item should be included as part of the cost of the equipment.
B)This item should be considered a revenue expenditure.

Question

Quizplus · Accepted Answer

Since the purchase was made for cash, the discount terms are applicable. This means that the cost of the equipment should be recorded at its cash equivalent value, which is the net amount of $98,000 (after deducting the 2% discount). Therefore, the $2,000 discount should be included as part of the cost of the equipment.

A Construction Company Purchased a Piece of Equipment with a Price