Your advice is sought as to how the following payments should be dealt with when preparing financial
Question:
Your advice is sought as to how the following payments should be dealt with when preparing financial statements for the year ended 31 December 2012:
(i) £1,200 paid for replacing a vehicle’s crankshaft when it became necessary following an accident.
(ii) £14,500 paid for an additional thermostat fitted to the cold storage room for the purpose of improving the freezing capacity by 150%.
(iii) £12,000 paid for replacing a lining on a furnace. The furnace, installed four years earlier at a cost of £96,000, is expected to remain in economic use for at least 20 years provided its lining is replaced every four years.
(iv) £7,500 paid for overhauling and restoring to a roadworthy condition a pick-up truck acquired at a cost of £24,000 and fully depreciated by 30 September 2012.
(v) £24,000 paid for installing a new production process resulting in significant cost savings.
Step by Step Answer:
Financial Accounting An Introduction
ISBN: 9780273737650
2nd Edition
Authors: Mr Barry Elliott, Mr Augustine Benedict