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
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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