Problem 1Knight Company purchased an equipment for P369,600 to be used in the construction of MRT-3. Thecompany had to pay the following in relation to the equipment:Import dutiesP10,000Non-refundable taxes15,000Shipping costsCost of testing2,0001,200Installation costs1,800Other information:• The company is required to dismantle the equipment at the end of its useful life. The companyestimates the dismantling costs to be P50,000. The relevant discount rate is 10%.• The equipment has a useful life of 5 years.How much is the initial cost of the equipment?• The purchase price includes input vat of P39 600How much is the initial cost of the asset?

Purchase price Less: Trade discount/Rebate Add: Import Duties Add: Non refundable taxes Add:…

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Accounting

How much is the initial cost of the asset?

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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Question

Problem 1
Knight Company purchased an equipment for P369,600 to be used in the construction of MRT-3. The
company had to pay the following in relation to the equipment:
Import duties
P10,000
Non-refundable taxes
15,000
Shipping costs
Cost of testing
2,000
1,200
Installation costs
1,800
Other information:
• The company is required to dismantle the equipment at the end of its useful life. The company
estimates the dismantling costs to be P50,000. The relevant discount rate is 10%.
• The equipment has a useful life of 5 years.
How much is the initial cost of the equipment?
• The purchase price includes input vat of P39 600
How much is the initial cost of the asset?

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