Question

In: Accounting

1- In the year ended May 31, 20X5, Hardware Inc. purchased new machinery from an overseas...

1- In the year ended May 31, 20X5, Hardware Inc. purchased new machinery from an overseas manufacturer. The cost of the machine totalled $500,000. Shipping and duties incurred by the company totalled $35,000. Hardware needed to bring a mechanic from overseas to assist with the installation. Costs of installation totalled $15,000. A rebate of $40,000 was given to Hardware because this was the company’s second machine purchase from the manufacturer. Prior to delivery, to prepare for installation of the new machine, Hardware incurred labour costs of $12,000 and general overhead of $9,000.

What is the total asset cost that Hardware should record for the new machinery?
A- 487,000
B- 522,000
C- 531,000
D- 562,000

2- Which of the following statements regarding the accounting treatment of intangible assets under IFRS is true?
a- All intangible assets have an indefinite useful life.
b- All intangible assets are internally generated
c- All intangible assets should be tested for impairment.
d- All intangible assets are subsequently measured using the cost model

Solutions

Expert Solution

1)Answer B-522000

The cost of machine =500,000

Add:All necessary cost incurred to bring the asset in to working condition.

Shipping and duties =35000

Cost of installation =15000

Labour cost =12000

General overhead =Nil

(general overhead are not incurred to bring the asset in to working condition and it doesn't enhance the efficiency of machine)

Less:All rabates received =(40,000)

(All rebate & Discount received in connection with purchase of Plant property and equipment should be deducted from its cost)

Hence Total asset cost=500,000+35000+15000+12000-40000=522000

2)Answer-C

a)Wrong.All intangible asset doesn't have an indefinite useful life.Some have an indefinite life and some won't have. Hence this option is wrong

b)Wrong.Intangible asset is either self-generated or bought from outside, Hence this option is wrong

c)True.All intangible asset should be tested for impairment annually or whenever there is an indication of impairment.

d)Wrong.It is subsequently valued using either cost or revaluation model.

Hope you understood.Thank You :)

ekkarill92 answered 1 year ago
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