The components of the cost of a major item of equipment are given below: $ Purchase price 780,000 Import duties 117,000 VAT (refundable) 78,000 Site preparation 30,000 Installation 28,000 Testing 10,000 Initial losses before asset reaches planned performance 50,000 Discounted cost of dismantling and removal at end of useful life 40,000 1,133,000 What amount should be recognised as the cost of the asset in accordance with IAS 16 Property, plant and equipment ?

College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter18: Accounting For Long-term Assets
Section: Chapter Questions
Problem 3CE: A machine costing 350,000 has a salvage value of 15,000 and an estimated life of three years....
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The components of the cost of a major item of equipment are given below:

$

Purchase price 780,000

Import duties 117,000

VAT (refundable) 78,000

Site preparation 30,000

Installation 28,000

Testing 10,000

Initial losses before asset reaches planned performance 50,000

Discounted cost of dismantling and removal at end of useful life 40,000

1,133,000

What amount should be recognised as the cost of the asset in accordance with

IAS 16 Property, plant and equipment ?

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