On 1/1/2020, the Horizon Industrial Company purchased a machine on the account whose price is 850,000 dinars, and it is subject to a sales tax of 10,000 dinars. The company paid in cash the fees for transporting and installing the machine 60,000 dinars, the costs of making a special base for the machine with electricity extensions 40,000 dinars, and the costs of conducting the start-up experiments 140,000 dinars. The company estimated the life span of the machine at five years, and its salvage value is 200,000 dinars. The machine is depreciated according to the straight-line method. On 1/1/2021, the company conducted a coverage test for this machine and found that the fair market value of the machine minus its selling costs is 580,000 dinars and that the net present value of the cash flows is expected to be obtained from using the machine is 660,000 dinars. And that the remaining life of the machine is 3 years, not 4 years. On December 31, 2022, the company conducted a coverage test for this machine and found that the recoverable value is 900,000 dinars. Required: Use the specialized accounting skills to apply the concepts related to the International Accounting Standard IAS 36 to record the following operations in the books of the Horizon Industrial Company: 1- Purchase of the machine. 2- Paying the fees for transportation, installation, special base, and start-up trials. 3- The 2020 share of the machine’s depreciation expenses.
On 1/1/2020, the Horizon Industrial Company purchased a machine on the account whose price is 850,000 dinars, and it is subject to a sales tax of 10,000 dinars. The company paid in cash the fees for transporting and installing the machine 60,000 dinars, the costs of making a special base for the machine with electricity extensions 40,000 dinars, and the costs of conducting the start-up experiments 140,000 dinars. The company estimated the life span of the machine at five years, and its salvage value is 200,000 dinars. The machine is
On 1/1/2021, the company conducted a coverage test for this machine and found that the fair market value of the machine minus its selling costs is 580,000 dinars and that the
On December 31, 2022, the company conducted a coverage test for this machine and found that the recoverable value is 900,000 dinars.
Required: Use the specialized accounting skills to apply the concepts related to the International Accounting Standard IAS 36 to record the following operations in the books of the Horizon Industrial Company:
1- Purchase of the machine.
2- Paying the fees for transportation, installation, special base, and start-up trials.
3- The 2020 share of the machine’s depreciation expenses.
4- Decreased value of the machine
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