The correct answer is D. All of the above.
The first cost of an asset is the total amount of money that is spent to acquire it. This includes the purchase price, freight charges, installation expenses, initial taxes and permit fees, and any other costs that are directly related to acquiring the asset.
The first cost is important because it is used to calculate the depreciation of the asset. Depreciation is the process of allocating the cost of an asset over its useful life. The amount of depreciation that is taken each year is based on the asset’s first cost and its useful life.
The first cost is also important because it is used to calculate the asset’s book value. The book value of an asset is its original cost minus the amount of depreciation that has been taken. The book value of an asset is used to determine the amount of gain or loss that is realized when the asset is sold.
Here are some additional details about each of the options:
- The original purchase price is the amount of money that is paid to acquire the asset.
- Freight charges are the costs of transporting the asset to its final destination.
- Installation expenses are the costs of installing the asset and making it ready for use.
- Initial taxes and permit fees are the taxes and fees that are paid when the asset is acquired.
All of these costs are included in the first cost of an asset.