Bliesmer Electronics incurred the following costs. 1. Sales tax on factory machinery purchased € 5,000 2....

Bliesmer Electronics incurred the following costs.

1.	Sales tax on factory machinery purchased	€ 5,000
2.	Painting of and lettering on truck immediately upon purchase	700
3.	Installation and testing of factory machinery	2,000
4.	Real estate broker's commission on land purchased	3,500
5.	Insurance premium paid for first year's insurance on new truck	1,100
6.	Cost of landscaping on property purchased	7,200
7.	Cost of paving parking lot for new building constructed	17,900
8.	Cost of clearing, draining, and filling land	12,600
9.	Architect's fees on self‐constructed building	10,000

Instructions

- Determine property, plant, and equipment costs.

- Indicate to which account Bliesmer would debit each of the costsAssume a monthly accounting period.

- The following accounts are available in the general ledger: Prepaid Insurance; GST Clearing; Land; Buildings; Equipment; Land Improvements; Interest Expense; Other Expense.

- Assume the “sales tax” of €5,000 in the first item is GST. All of the other figures given, beginning with Cost 2., are net of GST.

- Add the following cost #10: €30,000 of interest incurred on borrowings to finance construction of the building, where €2,000 was incurred prior to construction, $24,000 was incurred during the nine-month construction period, and €4,000 was incurred after construction was completed.

Solutions

Expert Solution

PPE Cost

The original cost of an asset takes into consideration all of the items that can be attributed to its purchase and to putting the asset to use. These costs include the purchase price and such factors as commissions, transportation, appraisals, warranties and installation and testing

Sr.no	Particulars	Amount	Reason	Include or Exclude
1	Sales tax on factory machinery purchased	€ 5,000	Assume No credit is available	Include
2	Painting of and lettering on truck immediately upon purchase	700	Necessary for installation	Include
3	Installation and testing of factory machinery	2,000	Necessary	Include
4	Real estate broker's commission on land purchased	3,500	Necessary	Include
5	Insurance premium paid for first year's insurance on new truck	1,100	Necessary	Include
6	Cost of landscaping on property purchased	7,200	Necessary	Include
7	Cost of paving parking lot for new building constructed	17,900	Necessary	Include
8	Cost of clearing, draining, and filling land	12,600	Necessary	Include
9	Architect's fees on self‐constructed building	10,000	Necessary	Include

	PPE cost	60,000

B. Account Bliesmer would debit each of the costsAssume a monthly accounting period No its Not necessary, It can pass lumsum entry and capitalise with PPE cost, No separate entry is required

c. We can assume that GSt credit is available by filing GSTR 1 and 3B and filling annual return

Then Price will be 55000

Sr.no	Particulars	Amount	Reason	Include or Exclude
1	Sales tax on factory machinery purchased	€ 5,000	Credit available	Include
2	Painting of and lettering on truck immediately upon purchase	700	Necessary for installation	Include
3	Installation and testing of factory machinery	2,000	Necessary	Include
4	Real estate broker's commission on land purchased	3,500	Necessary	Include
5	Insurance premium paid for first year's insurance on new truck	1,100	Necessary	Include
6	Cost of landscaping on property purchased	7,200	Necessary	Include
7	Cost of paving parking lot for new building constructed	17,900	Necessary	Include
8	Cost of clearing, draining, and filling land	12,600	Necessary	Include
9	Architect's fees on self‐constructed building	10,000	Necessary	Include

Cost of PPE

55,000

d. Concept of Finance cost pre construction period and Post construction period

Qualifying Assets

Qualifying assets are the assets which are being built by an entity and it takes a substantial time to build them. Assets which are ready for their intended use or sale, when they are acquired, are not qualifying assets for the purpose of IAS 23.

Sr.no	Particulars	Amount	Reason	Include or Exclude
1	Borrowing to finance	30000	Qualfying Assets	Include
2	Cost Prior Construction	2000	Assume that it is necessary to start construction	Include
3	9 Month	24000	Qualfying Assets	Include
4	After Construction	4000	Not Qualyfing	Not Include

part of PPE

56000

ekkarill92 answered 1 year ago

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