ABC has recently purchased an air-conditioning unit from HM Air Conditioning Ltd. The details of the purchase
Question:
ABC has recently purchased an air-conditioning unit from HM Air Conditioning Ltd. The details of the purchase are given below: Rs
Price List 480,000
Trade Discount 12.5%
Directly attributable costs:
´Transport and handling costs 5,500
´Estimated pre-usage test 25,000
´Maintenance contract for 5 yrs 5,000
Site Preparation cost:
´Electric cable installation 28,000
Steel Reinforcement costs 9,000
´Own Labour and material costs 15,000
ABC paid for the plant earlier than the due date and obtained a discount of 5%. The Useful Economic Life of the asset is 8 years at the end which the company will have to incur compulsory cost of Rs 20,000 to dismantle the plant and Rs 6,000 to restore the building to its original condition. There was an error in the specification of the cable and the installation had to be rectified at a cost of Rs 12,000 which is included in the above figure of Rs 28,000
Calculate the amount at which the initial cost of the plant should be recognized?
Expert Answer:
To calculate the amount at which the initial cost of the plant should be recognized we need to consi... View the full answer
