Problem 1Knight Company purchased an equipment for P369,600 to be used in the construction of MRT-3. Thecompany had to pay the following in relation to the equipment:Import dutiesP10,000Non-refundable taxes15,000Shipping costsCost of testing2,0001,200Installation costs1,800Other information:• The company is required to dismantle the equipment at the end of its useful life. The companyestimates the dismantling costs to be P50,000. The relevant discount rate is 10%.• The equipment has a useful life of 5 years.How much is the initial cost of the equipment?• The purchase price includes input vat of P39 600How much is the initial cost of the asset?

Purchase price Less: Trade discount/Rebate Add: Import Duties Add: Non refundable taxes Add:…

Answered: How much is the initial cost of the…

Business

Accounting

How much is the initial cost of the asset?

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter8: Operating Assets: Property, Plant, And Equipment, And Intangibles

Section: Chapter Questions

Problem 8.1E

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