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An entity acquired specialized computer software for use in its manufacturing process on 1 February 2016. The cost price from the software vendor is R120 000 which will be paid as follows: R40 000 cash upfront which was paid on 1 February 2016 R80 000 will be paid 31 October 2016. The entity can borrow loans at market interest rate 10% p.a. currently from banks. Normal credit payment period for goods purchased on credit for the entity is three months.   At what cost should the specialized computer software

An entity acquired specialized computer software for use in its manufacturing process on 1 February 2016. The cost price from the software vendor is R120 000 which will be paid as follows: R40 000 cash upfront which was paid on 1 February 2016 R80 000 will be paid 31 October 2016. The entity can borrow loans at market interest rate 10% p.a. currently from banks. Normal credit payment period for goods purchased on credit for the entity is three months.   At what cost should the specialized computer software

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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An entity acquired specialized computer software for use in its manufacturing process on 1 February 2016. The cost price from the software vendor is R120 000 which will be paid as follows:

  • R40 000 cash upfront which was paid on 1 February 2016
  • R80 000 will be paid 31 October 2016.

The entity can borrow loans at market interest rate 10% p.a. currently from banks. Normal credit payment period for goods purchased on credit for the entity is three months.

 

At what cost should the specialized computer software be recognized in the books of the entity?

 

Select one:
a. R40 000
b. R112 727
c. R113 629
d. R120 000
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