Furnaces Pty Ltd was advised by a local building inspector that one of the chimneys on its premises was unsafe and, unless it was repaired, the factory would have to be closed. Furnaces decided that it was not feasible to stop operations to repair the chimney, so they gained permission to build an alternative chimney adjacent to the old chimney, thereby allowing production to continue. They found that although the new chimney was substantially the same size and make as the old one, it was cheaper to build than it would have been to repair the old one. Also, the new chimney can better ventilate the weather, which was not available in the previous one. After the new chimney was erected, the old chimney was demolished. Is any amount allowable as a deduction for the cost of the new chimney

Furnaces Pty Ltd was advised by a local building inspector that one of the chimneys on its premises was unsafe and, unless it was repaired, the factory would have to be closed. Furnaces decided that it was not feasible to stop operations to repair the chimney, so they gained permission to build an alternative chimney adjacent to the old chimney, thereby allowing production to continue. They found that although the new chimney was substantially the same size and make as the old one, it was cheaper to build than it would have been to repair the old one. Also, the new chimney can better ventilate the weather, which was not available in the previous one. After the new chimney was erected, the old chimney was demolished. Is any amount allowable as a deduction for the cost of the new chimney

Business Its Legal Ethical & Global Environment

10th Edition

ISBN:9781305224414

Author:JENNINGS

Publisher:JENNINGS

Chapter11: Environmental Regulation And Sustainability

Section: Chapter Questions

Problem 3QAP

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QUESTION Furnaces Pty Ltd was advised by a local building inspector that one of the chimneys on its premiseswas unsafe and, unless it was repaired, the factory would have to be closed. Furnaces decided thatit was not feasible to stop operations to repair the chimney, so they gained permission to build analternative chimney adjacent to the old chimney, thereby allowing production to continue. They foundthat although the new chimney was substantially the same size and make as the old one, it wascheaper to build than it would have been to repair the old one. Also, the new chimney can betterventilate the weather, which was not available in the previous one. After the new chimney waserected, the old chimney was demolished.Is any amount allowable as a deduction for the cost of the new chimney?
A company manufacturing acids, upon inspection of the roofing of the plant, found out that it isbadly corroded from the acid fumes and would need to be replaced. To try to get some more lifeout of the roofing, te company consulted a roofing coating contractor who presented thecompany with two options. The first option is coating that will cost ₱20,000 which would extendthe life of the roofing for 3 years from the date of application. And the second option will costP30,000 and which would extend the life of the roofing for 5 years from the date of application.At what rate of return are the two investments equal?
Russell Forest Products Limited needed to upgrade a burner at its sawmill in Cochrane, Ontario, to comply with the new air pollution standards. The new burner, which is used to burn the scrap wood from its sawing operations, will not only reduce the amount of pollution, but will supply heat for the plant facility, including the wood dryer. In order to encourage Russell Forest Products Limited in its compliance with the stan- dards, the Province of Ontario extended an interest-free loan of $400,000 on December 31, 2011. The only conditions in obtaining the interest-free loan are that the loan proceeds be applied directly to the construction costs and that the loan be repaid in full on December 31, 2019. RussellForest Products Limited borrowed the remaining funds from the bank for the construction of the burner and will be paying interest at the rate of 7% per year. Instructions (a) Discuss the issues related to obtaining the interest-free loan from the Province of Ontario. (b)…
Velstrom Ltd is considering outsourcing one of its products rather than producing it in its factory. The business allocates part of the total rental charge of the factory, based on floor area, on the section responsible for making the product. The section bears a charge of £20,000 per year. If the section were closed, the floor space released would be used for warehousing and, as a result, the business would give up the tenancy of an existing warehouse for which it is paying £25,000 a year. SO what is the answer
Velstrom Ltd is considering outsourcing one of its products rather than producing it in its factory. The business allocates part of the total rental charge of the factory, based on floor area, on the section responsible for making the product. The section bears a charge of £20,000 per year. If the section were closed, the floor space released would be used for warehousing and, as a result, the business would give up the tenancy of an existing warehouse for which it is paying £25,000 a year. A business has approached Velstrom Ltd to offer £22,000 a year to sublet the released factory space. What will be the relevant benefit of releasing the factory space?
Fusion Metals Company is considering the elimination of its Packaging Department. Management has received an offer from an outside firm to supply all Fusion’s packaging needs. To help her in making the decision, Fusion’s president has asked the controller for an analysis of the cost of running Fusion’s Packaging Department. Included in that analysis is $9,100 of rent, which represents the Packaging Department’s allocation of the rent on Fusion’s factory building. If the Packaging Department is eliminated,the space it used will be converted to storage space. Currently Fusion rents storage space in a nearby warehouse for $11,000 per year. The warehouse rental would no longer be necessary if the Packaging Department were eliminated. Required:1. Discuss each of the figures given in the exercise with regard to its relevance in the departmentclosing decision.2. What type of cost is the $11,000 warehouse rental, from the viewpoint of the costs of the Packaging Department?
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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
Assume that you are an independent consultant working for Billy plc, a medium-sized construction company primarily engaged in building new residential premises on derelict land in and around towns and cities across England and Wales. Billy plc has always tried to act in a way which minimises the environmental impact of its activities and is conscious of its obligations to local residents who may be adversely affected by its activities. For example, all site work is carried out during weekdays and the company maximises the use of recycled and eco-friendly materials in its construction work. The directors have become increasingly aware of the importance of their social and environmental responsibilities and they are also aware that Billy plc compares favourably with other companies in the industry. They are interested in how the good reputation of the company can be turned to commercial advantage but they are unsure how to best communicate their activities. They have requested that you…
Jireh Limited also manufactures prefab components for the housing industry. They have just been offered a new four year contract to supply a component, subject to them meeting certain quality requirements set by GREDA Ghana. The production manager is concerned that the current machine, which has been fully depreciated, will not be able to meet the stringent quality controls that will be required because the technology is obsolete, and the machine is unreliable. The company currently spends £50,000 per year to maintain and operate this machine which has no secondhand market value. On the basis of the production managerʼs recommendation, management has decided to replace the current machine. It is estimated that the replacement machine will cost £1 million with a four-year useful life. The companyʼs depreciation policy is to use a 20% reducing balance method over the life of the asset. As part of the purchase agreement for the new machine, the suppliers are offering a special maintenance…
Old Island Fumigation, Inc., fumigated buildings A and B of a condominium complex using Vikane gas. Buildings A and B, together with building C, form a U shape; buildings B and C have between them an atrium and were thought to be separated by an impenetrable fire wall. Although Old Island evacuated occupants of buildings A and B before the fumigation, the company advised the occupants of building C that they could remain in their dwellings while the other buildings were treated. Several residents of building C became ill shortly after the Vikane gas was released into the adjacent buildings. The hospital admission forms indicate that the cause of their illnesses was sulfuryl fluoride poisoning. Sulfuryl fluoride is the active chemical ingredient of Vikane. Several months after this incident, an architect hired by the fumigation company discovered that the fire wall between buildings B and C was defective and contained a four-foot-by-eighteen-inch open space through which the gas had…
SK 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 Machine. Provide a reason for your conclusions in detail as per IAS 16 measurement recognition. 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