e system was estimated to require a complete upgrade in five years to avoid obsolescenc ncurred for all items above. All of the above costs were subject to a 6% non-refundable p a training course was conducted for the staff that would be using the new equipment, a llows IFRS, and that any allocation of common costs is done to the nearest 1% (e.g. 80 % lo decides to capitalize the following components of the computer system: server equipm e amount to be capitalized for each of these asset groups. (Round percentage to O decimal p aces, eg. 5,275.) Cost

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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K 16

Buffalo Co. recently installed some new computer equipment. To prepare for the installation, Buffalo had some electrical work done in
what was to become the server room, costing $18,000. The invoice price of the server equipment was $190,000. Three printers were
also purchased at a cost of $1,800 each. The software for the system was an additional $42,000. The server equipment was believed to
have a useful life of eight years, but due to the heavy anticipated usage, the printers were expected to have only a four-year useful life.
The software to run the system was estimated to require a complete upgrade in five years to avoid obsolescence. Additionally, delivery
costs of $10,000 was incurred for all items above. All of the above costs were subject to a 6% non-refundable provincial sales tax
During the installation, a training course was conducted for the staff that would be using the new equipment, at a cost of $9,500.
Assume that Buffalo follows IFRS, and that any allocation of common costs is done to the nearest 1% (e.g.. 80 %, 6%, 14%).
(b) Assume that Buffalo decides to capitalize the following components of the computer system: server equipment, printers, and
software. Calculate the amount to be capitalized for each of these asset groups. (Round percentage to O decimal places, e.g. 52%. Round
answers to O decimal places, e.g. 5,275.)
Server equipment. $
Printers
Software
eTextbook and Media
Save for Later
Cost
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Transcribed Image Text:Buffalo Co. recently installed some new computer equipment. To prepare for the installation, Buffalo had some electrical work done in what was to become the server room, costing $18,000. The invoice price of the server equipment was $190,000. Three printers were also purchased at a cost of $1,800 each. The software for the system was an additional $42,000. The server equipment was believed to have a useful life of eight years, but due to the heavy anticipated usage, the printers were expected to have only a four-year useful life. The software to run the system was estimated to require a complete upgrade in five years to avoid obsolescence. Additionally, delivery costs of $10,000 was incurred for all items above. All of the above costs were subject to a 6% non-refundable provincial sales tax During the installation, a training course was conducted for the staff that would be using the new equipment, at a cost of $9,500. Assume that Buffalo follows IFRS, and that any allocation of common costs is done to the nearest 1% (e.g.. 80 %, 6%, 14%). (b) Assume that Buffalo decides to capitalize the following components of the computer system: server equipment, printers, and software. Calculate the amount to be capitalized for each of these asset groups. (Round percentage to O decimal places, e.g. 52%. Round answers to O decimal places, e.g. 5,275.) Server equipment. $ Printers Software eTextbook and Media Save for Later Cost Attempts: 0 of 2 used Submit Answer
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