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Hi Mr John…I didn’t understand the question written in the test in Sales tax topic…The questions says: How much should Gareth capitalism as a non current asset in relation to the purchase?
He bought computer :
Cost for comp-
Delivery cost
Installation
Maintenance
Sales tax…
Can you explain what the question wants us to find out? In elaboration if possible….Thank you…Which test are you asking about? This is not a question in the test at the end of the Sales Tax chapter in our lecture notes!
The question asks how much of the total expenditure should appear on the SOFP as a non-current asset.
Sales tax will not appear (assuming they are registered for sales tax) because that is recoverable from the state.
Maintenance will not appear because that is an expense that will appear in the SOPL and not as an asset in the SOFP.
(You need to look at the chapter in the lecture notes on non-current assets).
But there’s that question at the Chapter 12(Sales Tax) Test\Question 2…Can you solve this question thank you…What is total expenditure is this like capital expenditure+revenue expenditure? Or smth else ..
Sorry – you are right!! I don’t know how I missed it before 🙁
However, my answer is the same as before.
You capitalise as a non-current asset the cost of getting the asset ready to work.
So the cost of the computer, the cost of the extra memory, the cost of installing and delivering it are all capital expenditure. The total of those will be recorded as a non-current asset.
The maintenance is a running expense and will appear as an expense in the SOPL.
The sales tax is recoverable from the state because Gareth is registered for sales tax, and so is debited to the sales tax account – it is neither an expense not an asset.
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