the cost of moving the machine to another manufacturing plant. the cost of a new attachment to the machine that provides for more output per unit of time. The cost of overhauling and extending the life of the machine. the cost of cleaning and lubricating the machine.
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- To what extent do you consider the following items to be proper costs of the fixed asset? Give reasons for your opinions. a. Overhead of a business that builds its own equipment. b. Cash discounts on purchases of equipment. c. Interest paid during construction of a building. d. Cost of a safety device installed on a machine. e. Freight on equipment returned before installation, for replacement by other equipment of greater capacity. f. Cost of moving machinery to a new location. g. Cost of plywood partitions erected as part of the remodeling of the office. h. Replastering of a section of the building. i. Cost of a new motor for one of the trucks.The following expenditures were incurred in connection with a new machine acquired by a metals manufacturing company.Identify those that should be included in the cost of the asset.(a) Freight charges, (b) sales tax on the machine, (c) payment to a passing motorist whosecar was damaged by the equipment used in unloading the machine, (d) wages of employees for time spent in installing and testing the machine before it was placed in service, (e) wages of employees assigned to lubricate and makeminor adjustments to the machine one year after it was placed in serviceWithin the accounting system of a group of companies, the following types of expenses are incurred. Complete the following table by placing each expense in the correct cost classification. Reference Number Types of expenses 1 Costs of opening a new facility 2 Costs of conducting business in a new location or with a new class of customer (including costs of staff training) 3 Costs of site preparation 4 Costs of testing whether the asset is functioning properly 5 Electrical installation costs 6 Costs of dismantling and removing the item and restoring the site on which it is located 7 Administration costs 8 Import duty of an imported machine 9 Purchase of a five-year maintenance contract with plant 10 Legal fees for sales and purchase agreement for acquisition of land 11 Interest on loan on a self constructed property after the asset is ready for use 12 Architect fees incurred for self constructed building 13 General overheads incurred for self…
- 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 machineCorella 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 LKAS 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 machineWhich of the following are includable to the cost of property and equipment? Transportation costs on machinery purchased under terms FOB shipping point Interest on loans borrowed to purchase an equipment Installation costs and cost of trial runs of a machinery Repairs on broken glass windows of a purchased buildings prior to occupancy
- Nizwa Company bought an equipment for manufacturing tube lights and the company management requested you to analyze and submit the report regarding the four major factors that required to consider for calculating depreciation of an equipment?Certain activities are listed below. Indicate which of the activities would be considered in determining R&D costs. Yes or No? a. Testing a new type of machine to evaluate its potential usefulness in production b. Engineering follow-through in an early phase of commercial production c. Total cost of an R&D building-No alternative use d. Salary of director of R&D e. Current period depreciation on a building housing R&D activities (alternative future use) f. General and administrative costs reasonably allocated to R&D projects g. Patent acquired solely for use in a specific R&D projectThe controller of Excello Manufacturing, Inc., wants to use analytical procedures toidentify the possible existence of idle equipment or the possibility that equipmenthas been disposed of without having been written off. Which of the following ratioswill best accomplish this objective?(1) Depreciation expense/book value of manufacturing equipment.(2) Accumulated depreciation/book value of manufacturing equipment.(3) Repairs and maintenance cost/direct labor costs.(4) Gross manufacturing equipment cost/units produced.
- Which one of the following costs is not directly attributable to the cost of anon-current asset, per IAS 16?a) Installation of a new machineb) Delivery cost of a new machinec) 2-year maintenance contract for new machined) Preparation of site for new machineWhich of the following statements is (are) correct?a. Accumulated depreciation represents a cash fund beingaccumulated for the replacement of plant assets.b. The cost of a machine includes the cost of repairingdamage to the machine during the installation process.c. A company may use different depreciation methods inits financial statements and its income tax return.d. The use of an accelerated depreciation method causesan asset to wear out more quickly than does use of thestraight-line method.Annual depreciation of equipment, where the amount of depreciation charged is computed by the machine-hours method.