10-31-2011, 09:35 PM
Question 1 Solution
Expenses related to the import of the plant 1,620,000
Site preparation 4,900,000
Operating losses before commercial production 400,000
Cost of test run & special staff training 730,000
Misc. Administrative Expenses 75,000
Interest paid to the vendor for deferred credit 200,000 Compensation by the vendor for capacity default 900,000
Estimated dismantling and other costs 1,150,000
Cost of damaged instruments 150,000
Here is the solution
Add following items for the cost
Expenses related to the import of the plant 1,620,000
Site preparation 4,900,000
Cost of test run & special staff training 730,000
Interest paid to the vendor for deferred credit 200,000
Estimated dismantling and other costs 1,150,000
Cost of damaged instruments 150,000
That makes it = 4340000
Now less following items
Compensation by the vendor for capacity default 900,000
4340000-900000
That makes it 3440000
The final cost that will be takes is 3440000
Don’t add operating losses and miscellaneous expenses because they are not directly related to the cost of asset,, and don’t less them.. they are irrelevant,,, just leave them,,,
For the reference…. See the IAS 16, Property Plant and equipment,,, page number 19. topic is “components of cost”
. At 31st December, 2010 the inventory in hand was as follows: Items
Quantity
(Units)
Cost per UnitRs. (000)
NRV per Unit Rs. (000)
Sofa Set
100
85
98
Dinning Table
150
120
105
Bed
200
150
180
Dressing Table
400
60
55
Wardrobe
450
75
70
for dining table and wardrobe cost is more than NRV,, they will be recorded at the NRV..and following adjusting entries will be passed for them,, ( debit the p/l account with the difference in value, ,, and credit the stock in trade account…
for dining table
P/l Account 15 Rs debit
Stock in trade 15 Rs Credit
For the wardrobe
PL account 5 Rs debit
Stock in trade 5 Rs credit
For dressing table,,
Pl account 5 debit
Stock in trade 5 credit
Final amount will be
85+105+150+55+70 = 465
Expenses related to the import of the plant 1,620,000
Site preparation 4,900,000
Operating losses before commercial production 400,000
Cost of test run & special staff training 730,000
Misc. Administrative Expenses 75,000
Interest paid to the vendor for deferred credit 200,000 Compensation by the vendor for capacity default 900,000
Estimated dismantling and other costs 1,150,000
Cost of damaged instruments 150,000
Here is the solution
Add following items for the cost
Expenses related to the import of the plant 1,620,000
Site preparation 4,900,000
Cost of test run & special staff training 730,000
Interest paid to the vendor for deferred credit 200,000
Estimated dismantling and other costs 1,150,000
Cost of damaged instruments 150,000
That makes it = 4340000
Now less following items
Compensation by the vendor for capacity default 900,000
4340000-900000
That makes it 3440000
The final cost that will be takes is 3440000
Don’t add operating losses and miscellaneous expenses because they are not directly related to the cost of asset,, and don’t less them.. they are irrelevant,,, just leave them,,,
For the reference…. See the IAS 16, Property Plant and equipment,,, page number 19. topic is “components of cost”
. At 31st December, 2010 the inventory in hand was as follows: Items
Quantity
(Units)
Cost per UnitRs. (000)
NRV per Unit Rs. (000)
Sofa Set
100
85
98
Dinning Table
150
120
105
Bed
200
150
180
Dressing Table
400
60
55
Wardrobe
450
75
70
for dining table and wardrobe cost is more than NRV,, they will be recorded at the NRV..and following adjusting entries will be passed for them,, ( debit the p/l account with the difference in value, ,, and credit the stock in trade account…
for dining table
P/l Account 15 Rs debit
Stock in trade 15 Rs Credit
For the wardrobe
PL account 5 Rs debit
Stock in trade 5 Rs credit
For dressing table,,
Pl account 5 debit
Stock in trade 5 credit
Final amount will be
85+105+150+55+70 = 465
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