ACCA FA · Chapter 6 · Question 2 of 12
A company buys a machine with a list price of $48,000 and receives a 5% trade discount. It also pays delivery of $1,200, installation of $2,300, staff training on the machine of $900, and a one-year maintenance contract of $1,500. Recoverable sales tax of $9,120 was charged on the invoice. What is the cost of the machine under IAS 16 Property, Plant and Equipment?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $49,100
Explanation
Purchase price after trade discount = $48,000 x 95% = $45,600. Directly attributable costs of delivery ($1,200) and installation ($2,300) are capitalised: $45,600 + $1,200 + $2,300 = $49,100. Staff training and maintenance are expensed, and recoverable sales tax is not a cost. Including training gives $50,000; including training and maintenance gives $51,500.
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