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    snsingler's Avatar
    snsingler Posts: 1, Reputation: 1
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    #1

    Dec 16, 2010, 02:09 PM
    Mobley Company purchased an asset with a list price of $35,000
    Mobley Company purchased an asset with a list price of $35,000 and received a 2% cash discount on the purchase. The asset was delivered under terms FOB shipping point, and freight costs amounted to $700. Mobley paid $800 to have the asset installed. Insurance costs to protect the asset from fire and theft amounted to $400 for the first year of operations. Based on this information, the amount of cost recorded in the asset account would be:

    A. $36,500.
    B. $36,900.
    C. $35,000.
    D. $35,800.
    Just Looking's Avatar
    Just Looking Posts: 1,610, Reputation: 480
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    #2

    Dec 16, 2010, 02:45 PM

    The cost of an asset is the actual cost (less cash discounts) plus all expenses needed to obtain that asset and put it to use. This would include freight and installation. Insurance is not needed to make the asset work - it is an expense. If you'd like to verify the answer, please post what you think it is and how you got there. That way we can correct any misunderstanding. Thanks.
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