Reference no: EM132668808

Extravagant Inc. is installing a new plant at its production facility. It has incurred these costs:

1    Cost of the plant (cost per supplier's invoice plus taxes)  2,500,000

2    Initial delivery and handling costs                                     200,000

3   Cost of site preparation                                                  600,000

4  Consultants used for advise on the acquisition of the plant     700,000

5   Interest charges paid to supplier of plant for deferred credit     200,000

6   Estimated dismantling cost to be incurred after 7 years          300,000

7       Operating losses before commercial production                 400,000

Required:

Problem 1: Advise Extravagant Inc on the costs that can be capitalized in accordance to IAS 16.