ACCA Applied Knowledge · Financial Accounting · Tangible non-current assets
Which of the following costs incurred by Delta Co on a new machine should be capitalised as part of the cost of the machine under IAS 16?
Costs of testing whether the machine is functioning properly are capitalised under IAS 16 because they are directly attributable to bringing the asset to working condition. Training, initial operating losses and general administration overheads are not part of cost and must be expensed.
- AStaff training costs to operate the machine
- BCosts of testing whether the machine is functioning properlyCorrect
- CInitial operating losses while demand builds up
- DGeneral administration overheads allocated to the installation
Explanation
IAS 16 includes costs of testing that the asset functions properly as directly attributable cost. Training costs, initial operating losses and general administration overheads are specifically excluded and are expensed.
Did you get it right without looking?
One question tells you little. A timed set on Tangible non-current assets shows your real accuracy, how long you take and where you lose marks.
More Tangible non-current assets questions
- A company's non-current asset register shows a carrying amount for plant of $184,000, while the general ledger shows $190,000 for the same c…
- Brindle Co has a policy of depreciating plant at 25% per year on the reducing balance method, with a full year charged in the year of purcha…
- Which control is MOST directly designed to detect assets that are recorded in the register but no longer exist?
- Brightwell Co has a machine bought for $100,000 on 1 January 20X1, depreciated straight-line over 10 years with nil residual value. On 1 Jan…
- At 1 January a company's plant had cost $500,000 and accumulated depreciation $200,000 in the register. During the year it bought plant for …
- Which of the following is correctly classified as revenue expenditure?