Advise the directors whether or not X Limited should have entered into the contract. Justifyyour answer. X Limited provided the following information relating to its non-current assets at 1 January 2021.Plant andMachinery$Cost400 00060 000Accumulated depreciation16000024 000Net book value240 00036 000The following transactions took place during the year ended 31 December 2021.1 The building, which has a useful life of 20 years, was purchased on 1 January 2016. It wasrevalued to $750 000 on 1 January 2021.InstallationDeliveryBuilding$600 000150 000450 0002A new machine was purchased on 1 March 2021 costing $200 000. Other related costs were alsoincurred as follows:Pre-production testingRepair and maintenance for a 5-year contractMotorVehicle$BuildingPlant and machineryMotor vehiclesA full year's depreciation$110008000500030 00054 0003 The motor vehicle is a diesel lorry which was bought on 1 January 2019. It has an estimateduseful life of 5 years with no residual value. A recent government environmental policy urged XLimited to review the value of this lorry. Further information at 31 December 2021 relating to thelorry was as follows:Estimated value in useExpected selling price, before incurring selling costs of $4000$18500210004 The depreciation policy of X Limited is as follows:straight-line methodreducing balance method at an annual rate of 25%straight-line methodis charged in the year of purchase. Additional informationThe repair and maintenance cost of $30 000 for the 5-year contract for the new machine was paidon 1 March 2021.

Revaluation Surplus Any increases in the worth of capital investments are kept in an ownership…

Answered: Advise the directors whether or not X…

Business

Accounting

Advise the directors whether or not X Limited should have entered into the contract. Justify your answer.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter12: Intangibles

Section: Chapter Questions

Problem 8P

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