Question 15
Capital and Revenue ExpenditureSobande Incorporation acquired a machine that involved the following expenditures and related factors
(₦)
Gross invoice price 15,000
Sales tax 900
Purchases discount taken 300
Freight 750
Assembly of machine 500
Installation of machine 800
Assorted spare parts for future use 1200
Turning and adjusting machine 700
What is the initial accounting cost of the machine?
- A.₦19,550
- B.₦18,950
- C.₦18,350
- D.₦17,500.
Show the answer and explanation
Answer: C (₦18,350)
Explanation
Cost = 15 000 + 900 − 300 + 750 + 500 + 800 + 700 = ₦18 350. Spare parts for future use are not part of the machine's cost.