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NFCPAR-Auditing Problems: Description Machinery Others Notes

This document provides a summary of costs associated with the purchase and installation of new machinery. It lists purchase price, installation costs, and other costs that are considered part of the initial cost of the machinery according to accounting standards. Costs not considered part of the initial cost include repair costs, loss on a retired machine, and training costs for personnel, as they are not described in the accounting standards as components of property, plant and equipment cost. The total reported cost of the machinery is 1,476,000 and the total of other costs not considered part of the machinery cost is 48,000.

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88 views1 page

NFCPAR-Auditing Problems: Description Machinery Others Notes

This document provides a summary of costs associated with the purchase and installation of new machinery. It lists purchase price, installation costs, and other costs that are considered part of the initial cost of the machinery according to accounting standards. Costs not considered part of the initial cost include repair costs, loss on a retired machine, and training costs for personnel, as they are not described in the accounting standards as components of property, plant and equipment cost. The total reported cost of the machinery is 1,476,000 and the total of other costs not considered part of the machinery cost is 48,000.

Uploaded by

Sano Manjiro
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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NFCPAR- Auditing Problems

Solution Guide Property, Plant, and Equipment

DESCRIPTION MACHINERY OTHERS NOTES


Purchase price including VAT 1,400,000 (1)
Cost of water device to keep machine cool 8,000 (2)
Cost of safety rail and platform surrounding machine 12,000 (2)
Installation cost, including site preparation and assembling 20,000 (2)
Fees paid to consultants for advice on acquisition of the (2)
13,000
machinery
Dismantling cost of the machine 10,000 (3)
Repair cost of the machine damaged while in the process 5,000 (4)
of installation
Loss on premature retirement-old machine 18,000 (4)
Other non-refundable Sales tax 13,000 (1)
Cost of training for personnel who will use the machine 25,000 (4)
TOTAL 1,476,000 48,000

NOTES

1. PAS 16, paragraph 16-a: The cost of an item of PPE includes its purchase price, including
import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.
Since VAT is a refundable purchase tax, it is not included to the cost of the machinery.
2. PAS 16, paragraph 16-b: The cost of an item of PPE includes any cost directly attributable
to bringing the asset to the location and condition necessary for it to be capable of operating in
the manner intended by management.
3. PAS 16, paragraph 16-c: The cost of an item of PPE includes the initial estimate of the cost
of dismantling and removing the item and restoring the site on which it is located.
4. These items are not described by PAS 16, paragraph 16 “components of the cost of an item
of PPE”. Therefore, these items are not included to the cost of the machinery.

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