On 1 March 20X2, Yucca Co purchased an upgrade package from Plant Co at a cost of $18,000 for the machine it originally purchased in 20X0 (Example 1). The upgrade work took a total of two days where new components were added to the machine. Yucca agreed to purchase the upgrade package as the new components would lead to a reduction in production time per unit of 15%. This will enable Yucca to increase production without the need to purchase a new machine.

Required
Explain whether the additional expenditure should be capitalized as part of PPE or expensed to the statement of profit or loss for the year ended 28 February 20X3

Answer rating: 100% (QA)

The additional expenditure should be capitalized as part of PPE because it is an upgrade that will l... View the full answer