Under GAAP, what amount should Julia's printing press be listed on the books?

• A. $5,000
• B. $9,000
• C. $8,000
• D. $3,000

Answer: (A)

Under GAAP, a fixed asset is recorded at its cost, not its market value. The cost includes the price paid plus any amounts necessary to bring the asset to ready-for-use condition, and it’s reduced by any trade-in allowances or rebates received. If the printing press had a price of 9,000 and Julia received a 4,000 trade-in allowance on an older press, the net amount actually invested to obtain the new press is 5,000. That net figure represents the capitalized cost of the asset and is what should be listed on the books. The other amounts would reflect gross price or other values, not the actual cash net outlay required to acquire and prepare the asset for use.