Question

Which of the following expense is not included in the acquisition cost of plant and equipment? (2) a. Installation cost b. Freight and transportation charges c. Interest paid on loan taken for plant and machinery. d. Cost of site preparation. ​

Answer 1

Answer:

C

Explanation:

The cost of equipment, vehicles, and furniture includes the purchase price, sales taxes, transportation fees, insurance paid to cover the item during shipment, assembly, installation, Delivery and handling charges and all other costs associated with making the item ready for use.

Answer 2

Answer:

The acquisition cost of plant and equipment does not include interest paid on loans acquired for machinery and plant.

Explanation:

What are the acquisition costs comprised of?

• The acquisition cost is the total price paid to acquire a good. These expenses cover site preparation, installation, and testing charges in addition to shipping, sales taxes, and customs duties.
• Surveying, closing costs, and the elimination of license are some examples of acquisition expenditures when buying property.

Interest accrued on a loan for equipment and gear

• Accounting records the sum after discounts are added and closing costs are subtracted as the purchase cost of a company.
• Any paid sales tax, however, is excluded from this line item. For accounting purposes and in commercial sales, the phrase "cost of acquisition" is employed.

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