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Fixed Asset Capitalisation

This topic has 1 reply, 2 voices, and was last updated 10 years ago by John Moffat.

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November 20, 2014 at 11:43 am #211596
Barbara
Member
- Topics: 34
- Replies: 50
Hi John,
Why in this question the delivery and installation are included? They are not non-current assets.
Gareth, a sales tax registered trader purchased a computer for use in his business. The invoice for the computer showed
the following costs related to the purchase:
Computer 2136
Additional memory 228
Delivery 24
Installation 48
Maintenance (1 year) 60
TOTAL 2496
Sales tax (17.5%) 436.80
TOTAL 1,222
How much should Gareth capitalise as a non-current asset in relation to the purchase?
A $2932.80
B $2496
C $2136
D $2436
Answer: 2136+228+24+48 = 2436
November 20, 2014 at 5:09 pm #211673
John Moffat
Keymaster
- Topics: 57
- Replies: 54483
You should treat as part of the cost (i.e. capitalise) all costs in getting the machine ready to work.
If we did not pay for installation and delivery then we would not have the computer!
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