On 1 October 20X5 Dearing acquired a machine under the following terms. Hours $ Manufacturer's base price 1,050,000 Trade discount (applying to base price only) 20% Early settlement discount taken (on the payable amount of the base cost only) 5% Freight charges 30,000 Electrical installation cost 28,000 Staff training in use of machine 40,000 Pre-production testing 22,000 Purchase of a three-year maintenance contract 60,000 On 1 October 20X7 Dearing decided to upgrade the machine by adding new components at a cost of $200,000. This upgrade led to a reduction in the production time per unit of the goods being manufactured using the machine. What amount should be recognised under non-current assets as the cost of the machine? A $840,000 B $920,000 C $898,000 D $870,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On 1 October 20X5 Dearing acquired a machine under the following terms.

Hours $

Manufacturer's base price 1,050,000

Trade discount (applying to base price only) 20%

Early settlement discount taken (on the payable amount of the base cost

only)

5%

Freight charges 30,000

Electrical installation cost 28,000

Staff training in use of machine 40,000

Pre-production testing 22,000

Purchase of a three-year maintenance contract 60,000

On 1 October 20X7 Dearing decided to upgrade the machine by adding new components at a cost of

$200,000. This upgrade led to a reduction in the production time per unit of the goods being manufactured

using the machine.

What amount should be recognised under non-current assets as the cost of the machine?

A $840,000

B $920,000

C $898,000

D $870,000

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