Wisdom Company installed a new equipment at the production facility and incurred the following costs: Cost of equipment per supplier's invoice Initial delivery and handling cost Cost of site preparation Consultants used for advice on the acquisition of equipment Interest charges paid to supplier for deferred credit Estimated dismantling cost to be incurred as required by contract 300,000 Operating losses before commercial production 400,000 What total amount should be capitalized as cost of the equipment? 2,500,000 200,000 600,000 700,000 200,000

Wisdom Company installed a new equipment at the production facility and incurred the following costs: Cost of equipment per supplier's invoice Initial delivery and handling cost Cost of site preparation Consultants used for advice on the acquisition of equipment Interest charges paid to supplier for deferred credit Estimated dismantling cost to be incurred as required by contract 300,000 Operating losses before commercial production 400,000 What total amount should be capitalized as cost of the equipment? 2,500,000 200,000 600,000 700,000 200,000

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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A company's research department incurred $1,000,000 in material, labor, and overhead costs to construct a prototype of a new product and $100,000 to test and modify the prototype. Which of the following statements correctly describes the accounting treatment of prototype costs incurred by the company? 1. Capitalize $1,100,000 and amortize it over the expected sales life of the new product 2. Capitalize $1,100,000 and amortize it over the life of the prototype. 3. Capitalize $1,000,000 and amortize it over the life of the prototype and expense $100,000 as incurred. 4. Expense $1,100,000 as incurred.
AAA Company signed a contract charging a customer P600,000 to change the windows of a customer's house. The contract includes costs for materials and labor. The Company would charge P250,000 for materials if sold separately and P500,000 for labor if the customer will purchase the needed materials. How much of the transaction price would the company allocate to its performance obligation to provide the needed services to the customer?
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Dorman company purchased a new machine for its production process. The following costs were incurred for the new machine. Training costs for workers who will operate the machine $15,000 Wages paid to workers who operate the machine during production 109,000 Ordinary repairs to the machine before the first production run 1,000 1 Cost of platform used to properly secure the machine 30,000 Costs of tests run which took place before the first production run 8,000 WHICH COSTS SHOULD BE ADDED TO THE COST OF MACHINE?
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(a) Niasha Stores recently imported an item of plant from Grenadines Plants Ltd. The following information has been made available with regards to the purchase: Details $ Basic list price 3,000,000 Other costs: Transportation and handling 100,000 Pre-production testing 200,000 Holding structure for plant 350,000 Electrical inputs for plant 120,000 Own labour costs 250,000 Estimated maintenance costs for 5 years 300,000 The plant is expected to be useful for 8 years. At the end of this time, it will cost $180,000 to dismantle the plant and $140,000 to restore the site to its original state and use. Trade discount applicable to the purchase of the plant was 15% on the list price. Niasha Stores had made an error in purchasing electrical inputs amounting to $20,000. This cost was included in the above figure. In order to get the plant into the country Niasha Stores was charged 20% import duties on the basic list price. Niasha…
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