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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Q14
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
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education