The debit to the equipment account should equal $115,000 for X Circle Company, which recently purchased a computer system black box.
What is the recognized cost of the equipment?
The costs that should be recognized for the purchase of new equipment (or asset) include all the costs that will bring the asset into use.
These costs include the purchase cost, delivery, and installation costs.
Data and Calculations:
Computer system black box = $100,000
5% sales tax = $5,000 ($100,000 x 5%)
Delivery and Installation costs = $10,000
Total cost of computer = $115,000 ($100,000 + $5,000 + $10,000)
Thus, the debit to the equipment account should equal $115,000.
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