Stella Company uses many kinds of machines in its operations. The following information relates to amachine that was acquired at the beginning of the current year:Cash paid for machine, including VAT of P96,000Cost of transporting the machineLabor cost of installation by expert fitter896,00030,00050,000Labor cost of testing machineCost of safety rails and platform surrounding machineCost of water device to keep machine cool40,00060,00080,000Cost of adjustment to machine to make it operate more efficientlyEstimated dismantling cost to be incurred as required by contractInsurance cost for the current year75,00065,00015,000Cost of training personnel who will use the machine25,000How much should be capitalized as cost of the machine?

Name: Stella Company uses many kinds of machines in its operations. The fol
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Description: Stella Company uses many kinds of machines in its operations. The following information relates to amachine that was acquired at the beginning of the current year:Cash paid for machine, including VAT of P96,000Cost of transporting the machineLabor c

In order for the cost to be capitalised, all those cost are included which are incurred to bring the…

Business

Accounting

hachine that was acquired at the beginning of the current year: ash paid for machine, including VAT of P96,000 ost of transporting the machine abor cost of installation by expert fitter abor cost of testing machine ost of safety rails and platform surrounding machine ost of water device to keep machine cool ost of adjustment to machine to make it operate more efficiently 896,000 30,000 50,000 40,000 60,000 80,000 75,000 stimated dismantling cost to be incurred as required by contract 65,000 asurance cost for the current year 15,000 ost of training personnel who will use the machine 25,000 ow much should be capitalized as cost of the machine?

hachine that was acquired at the beginning of the current year: ash paid for machine, including VAT of P96,000 ost of transporting the machine abor cost of installation by expert fitter abor cost of testing machine ost of safety rails and platform surrounding machine ost of water device to keep machine cool ost of adjustment to machine to make it operate more efficiently 896,000 30,000 50,000 40,000 60,000 80,000 75,000 stimated dismantling cost to be incurred as required by contract 65,000 asurance cost for the current year 15,000 ost of training personnel who will use the machine 25,000 ow much should be capitalized as cost of the machine?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

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Question

Stella Company uses many kinds of machines in its operations. The following information relates to a
machine that was acquired at the beginning of the current year:
Cash paid for machine, including VAT of P96,000
Cost of transporting the machine
Labor cost of installation by expert fitter
896,000
30,000
50,000
Labor cost of testing machine
Cost of safety rails and platform surrounding machine
Cost of water device to keep machine cool
40,000
60,000
80,000
Cost of adjustment to machine to make it operate more efficiently
Estimated dismantling cost to be incurred as required by contract
Insurance cost for the current year
75,000
65,000
15,000
Cost of training personnel who will use the machine
25,000
How much should be capitalized as cost of the machine?

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