The accountant of Simplex Cosmetics LLC informs the board that profits of the company for 2 0
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Question:
The accountant of Simplex Cosmetics LLC informs the board that profits of the company for X are much lower than expected due to heavy repairs and maintenance expenses. An analysis of the repairs and maintenance account shows that it included:
a Upgrade of machinery, increasing its production capacity by to Tshs million.
b Tshs million for the replacement of major wornout components in an old piece of machinery. You receive additional information that the carrying value of the old parts was Tshs million. It was sold as scrap and the proceeds of Tshs million were credited to the sales account.
c Servicing costs: Sundry materials of Tshs million and wages of Tshs million.
d Simplex Cosmetics borrowed Tshs million @ from a financial institution for general business.
However this loan was also used for financing the upgrading of machinery to the tune of Tshs million.
The total interest of Tshs million was expensed to the statement of profit or loss. Included in it was interest attributable to the upgrading of Machinery of Tshs million.
Required:
Advice the accountant as to whether, these expenses are shown correctly.
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