Corella Ltd has acquired a new machine which it has had installed in its factory. Assess which of the following items should be capitalised into the cost of the building. Provide a reason for your conclusions as per IAS 16. Labour and travel costs for managers to inspect possible new machines and for negotiating for a new machineFreight costs and insurance to get the new machine to the factoryCosts for renovating a section of the factory, in anticipation of the new machine’s arrival, to ensure that all the other parts of the factory will have easy access to the new machineCost of cooling equipment to assist in the efficient operation of the new machineCosts of repairing the factory door, which was damaged by the installation of the new machineTraining costs of workers who will use the machine

Costs which are directly attributable to acquisition and maintenance of assets should be capitalized…

Answered: Corella Ltd has acquired a new machine…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter12: Intangibles

Section: Chapter Questions

Problem 5E

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Corella Ltd has acquired a new machine which it has had installed in its factory. Assess which of the following items should be capitalised into the cost of the building. Provide a reason for your conclusions as per IAS 16.

Labour and travel costs for managers to inspect possible new machines and for negotiating for a new machine
Freight costs and insurance to get the new machine to the factory
Costs for renovating a section of the factory, in anticipation of the new machine’s arrival, to ensure that all the other parts of the factory will have easy access to the new machine
Cost of cooling equipment to assist in the efficient operation of the new machine
Costs of repairing the factory door, which was damaged by the installation of the new machine
Training costs of workers who will use the machine

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