ACCA FR · Chapter 2 · Question 1 of 11
Plover Co bought a machine with a list price of $80,000, and received a 5% trade discount. It also paid delivery of $2,000, installation of $5,000, staff training on the machine of $3,000, an allocation of general administrative overheads of $1,500 and testing costs of $1,000 before the machine came into use. Under IAS 16, at what amount should the machine first be recognised?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $84,000
Explanation
IAS 16 cost includes the purchase price net of trade discounts and directly attributable costs of bringing the asset to working condition. Cost = $80,000 x 95% = $76,000 + delivery $2,000 + installation $5,000 + testing $1,000 = $84,000. Staff training and general administrative overheads are not directly attributable, so they are expensed.
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