i). Harris Ltd. exchanged a parcel of land with a carrying value of $15 million and fair value of $20 million, for some highly specialized machinery from Biden Corp. In addition, Harris Ltd. also paid $5 million along with the land in a transaction holding commercial substance to obtain the machinery.

Required:

What will be the cost of the specialized machinery in the financial statements of Harris Ltd.?

ii).

	$
List price (trade discount 12.5% on list price)	480,000
Haulage Cost	5,500
Pre-production testing of machinery	25,000
Repair & maintenance contact for 3 years	48,000
Running of electrical cable for machinery	28,000
Special foundation for mounting machinery	9,000
Labor Cost (Direct)	15,000

Harris Ltd paid for the machinery with in four weeks of the order, therefore, obtained an early settlement discount of 3%

Harris Ltd had wrongly specified the power loading of the original electrical cable to be installed by the contractor. The cost of rectifying this error of $12,000 is included in the above figure of $28,000.

The machinery is expected to have a useful life of 20 years. At the end of this period there will be compulsory costs of $30,000 to dismantle the machinery and $6,000 to restore the site to the original condition.

Required:

b). Determine the capitalized value of the artificial intelligent machinery in the financial statements of Harris Ltd.

a). Explain the treatment in the financials to be given to any cost or item not utilized in computing the capitalized value of the machinery.

Answer rating: 100% (QA)

1Cost of specialized machine in the books of Harris Ltd Fair Va... View the full answer