On 1 st January, 2019, Fan Milk Ltd. acquired a machine under the following terms for commercial production.
                                                 GH₵
Manufacturer's base price 2,000,000
Trade discount (applying to base price only) 15%
Early settlement discount taken (on the payable amount of the base cost only) 8%
Freight charges 50,000
Electrical installation cost 40,000
Staff training in use of machine 100,000
Pre-production testing 30,000 Purchase of a three-year maintenance contract 90,000
Consultants used for advice on the acquisition of the Machine 70,000
Operating losses before commercial production 80,000
Interest charges paid to supplier of plant for deferred credit 20,000
Estimated dismantling costs to be incurred after 10 years 30,000

i. What amount should be recognised under IAS 16: Property, Plant and Equipment as the cost of the machine?
ii. Give reasons for any item you will exclude from the computation of the cost of the machine.

Answer rating: 100% (QA)

i Amount to be recognised under IAS 16 Property Plant and Equipment as the cost of the machine Note ... View the full answer