Exercises - Intangible assets (Eng) Ex 1: Section 4.2.1. Recognition skill: basic In April 2001 your client, Company A decided to undertake a major restructuring of its manufacturing activities. The client currently has two factories in different towns that produce the same products. Management has decided that production will be moved to one of the factories (Z) and the facilities there will be upgraded in order to increase production significantly. The remaining factory (X) will be closed. The company has incurred the following costs: Cost of closing factory X, including the cost of terminating some existing contracts and 1,000,000 redundancy payments for staff Cost of feasibility study carried out by external consultants to determine the best system for factory Z Cost of relocating key staff to the town where factory Z is located. The staff are not contracted to remain with the company, but they are grateful for their jobs. Cost of implementing the new system in factory Z: consulting fees allocation of time spent by internal employees training for new staff Efficiency losses in early production stages Campaign specifically to advertise the new technology being used Required How should each of the above costs be accounted for: capitalised or expensed? 90,000 50,000 550,000 150,000 40,000 30,000 20,000
Exercises - Intangible assets (Eng) Ex 1: Section 4.2.1. Recognition skill: basic In April 2001 your client, Company A decided to undertake a major restructuring of its manufacturing activities. The client currently has two factories in different towns that produce the same products. Management has decided that production will be moved to one of the factories (Z) and the facilities there will be upgraded in order to increase production significantly. The remaining factory (X) will be closed. The company has incurred the following costs: Cost of closing factory X, including the cost of terminating some existing contracts and 1,000,000 redundancy payments for staff Cost of feasibility study carried out by external consultants to determine the best system for factory Z Cost of relocating key staff to the town where factory Z is located. The staff are not contracted to remain with the company, but they are grateful for their jobs. Cost of implementing the new system in factory Z: consulting fees allocation of time spent by internal employees training for new staff Efficiency losses in early production stages Campaign specifically to advertise the new technology being used Required How should each of the above costs be accounted for: capitalised or expensed? 90,000 50,000 550,000 150,000 40,000 30,000 20,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Exercises -- Intangible assets (Eng)
Ex 1: Section 4.2.1. Recognition skill: basic
In April 2001 your client, Company A decided to undertake a major restructuring of its
manufacturing activities. The client currently has two factories in different towns that produce the
same products. Management has decided that production will be moved to one of the factories (Z)
and the facilities there will be upgraded in order to increase production significantly. The
remaining factory (X) will be closed.
The company has incurred the following costs:
Cost of closing factory X, including the cost of terminating some existing contracts and 1,000,000
redundancy payments for staff
Cost of feasibility study carried out by external consultants to determine the best system for factory Z
Cost of relocating key staff to the town where factory Z is located. The staff are not contracted
to remain with the company, but they are grateful for their jobs.
Cost of implementing the new system in factory Z:
consulting fees
allocation of time spent by internal employees
training for new staff
Efficiency losses in early production stages
Campaign specifically to advertise the new technology being used
Required
How should each of the above costs be accounted for: capitalised or expensed?
90,000
50,000
550,000
150,000
40,000
30,000
20,000
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