Unformatted text preview: Tutorial Topic 2 (July 24, 2015) FA&R (SIM) Exercise 4.23 Cactus Ltd acquires some printing machinery. The amount paid to the manufacturer is $85 000, plus an additional $2000 for delivery. Once the machinery is delivered, it needs some modifications before it can be used. The modifications amount to $7000. An additional amount of $2000 is paid for installation. REQUIRED (a) For accounting purposes, what is the ‘cost’ of the machinery? (b) Could other costs be included in the measurement of the cost of acquiring the printing machinery if its construction and installation took a substantial period of time? Exercise 4.32 Double Island Ltd constructed a Whizbang Machine and incurred the following costs in doing so: Amounts paid to employees to build the machine $120 000 Raw materials consumed in building the machine $45 000 Depreciation of manufacturing equipment attributed to the construction of the Whizbang Machine $25 000 REQUIRED (a) Provide the journal entries that Double Island Ltd would use to account for the construction of the asset. (b) Assume that immediately after the journal entries in part (a) have been made, new information becomes available that indicates that the recoverable amount of the Whizbang Machine is only $160 000. Provide the adjusting journal entries. ...
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- Financial Reporting, $25 000, $45 000, $85 000, $120 000, $160 000