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Q1. what are the journal entries for
1. irrecoverable debts which had been written off, subsequently recovered
2. doubtful debts recovered for which an allowance for receivables had been made earlier
3. doubtful debts go bad, but an allowance had been made for them earlier. will this affect the allowance for receivables balance?Q2 a firm purchases a machine for 1000 and incurs training costs 500 to operate the machine. what will be the amount capitalised? are training costs included as capital expenditure? Bpp has included the training costs , whereas kaplan has excluded them.
Question 1
1.Dr receivable restoring the previously derecognised asset.
Cr The statement of comprehensive income.Dr Bank
Cr receivable2. Dr allowance
Cr Statement of comprehensive income3.Dr Statement of comprehensive income with bad debt expense when debt is judged to have gone bad.
Cr Receivable- derecognising the bad debt as an assetDr Allowance
Cr Statement of comprehensive income.
Question 2
Under IAS 16 only costs directly attributable to getting an asset into its intended working condition should be capitalised. Training costs associated with operating an asset do not ,in my opinion, fall into this category (specified by the standard) and should therefore not be capitalised.Training cost can not be the part of asset! skills remains with employee and employee can switch his work any time, so company can not capitalize the training cost ..
Good Luck
If you read IAS 16, this states that costs can only be capitalised for bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended.
This doesn’t include training costs as they are generally not required in order to bring the asset to its location or impact on the asset’s condition.
I am not sure which question it is you are looking at because I don’t have a copy of the Kaplan kit to compare, but in the BPP kit I have there is a similar question with the cost of testing a machine post-installation, but the training cost is excluded. The BPP study text also clearly states that training costs cannot be capitalised.
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