Flashcards
Ch.8 Tangible assets
Cards in this deck (5)
- 1ABC co incurred following expenses in the acquisition of equipment: Purchase price - 2000 Freight - 200 Sales tax - 400 Costs of teaching staff how to use equipment: 500. At what cost should equipment be recognised in SOFP?Answer: 2200.
Cost of teaching staff is the same expression for training staff. Staff training costs and sales tax are should not be included in cost of tangible assets. - 2Araba company incurred the following expenses in acquisition of equipment: Purchase price - 5000 Custom duty - 400 Purchase tax (non-refundable) - 1000 Installation cost - 600 1-year warranty contract cost - 2000 At what cost should equipment be recognised in SOFP?Answer: 7000
Warranty cost is considered maintenance cost and is not included in the cost of equipment. - 3Saglam medical company bought new X-ray machine and incurred the following expenses: Purchase price - 10000 Sales tax - 2000 Advertising cost - 1000 Delivery costs- 1000 Installation cost - 500 Salary of medical personnel who will use machine - 5000. At what cost should equipment be recognised in SOFP?Answer: 13500
Advertising cost is considered start-up cost. Medical personnel did not participate in acquisition of asset. Therefore salary is not included, too. - 4FAB co acquired equipment and incurred following expenses: Purchase price - 10000 Trade discount - 100 Staff training cost - 1000 Delivery cost - 1500 Installation cost - 2500 Further, company spent 500 for testing equipment. During test, company produced 2 samples which was later sold for 50. At what cost should equipment be recognised in SOFP?Answer: 14350
Trade discount is deducted from purchase price. Training cost is not included in cost of non-current asset. Cost of testing is calculated as 500-50=450 - 5The carrying amount of equipment at the beginning of year was 5000. Equipment is depreciated at 10% on reducing balance basis. During the financial year, the part of equipment was damaged and replaced for 200. At the end of financial year, specialist was invited to make change to equipment in order to increase quality of products produced from equipment. Specialist was paid 1000. What is carrying amount of equipment at the end of year?Answer: 5500.
Depreciation expense is 5000*10%=500. Cost of replacing part is a revenue expenditure. Cost of specialist to make change is considered upgrade cost since it intends to increase quality of output. Therfore, cost of speicalist will be added to carrying amount.
5000-500+1000=4500
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- Anar special Flashcards on Ch.8 Tangible assets , created by Anar Hasanov on 27/09/2019.
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