Reference no: EM132953006
Question - On 1 January 2020 Rozabella Bhd. purchased an equipment for RM600,000, including RM50,000 refundable purchase taxes. The entity incurred costs of RM20,000 in transporting the equipment to the entity's site and RM100,000 in installing the equipment at the site. At the end of the equipment's 10-year useful life the entity is required to dismantle the equipment and restore the land upon which the factory is build. The present value of the cost of dismantling the equipment and restoring the environment is estimated to be RM100,000.
In January 2020 the entity's engineer incurred the following costs in modifying the equipment so that it can produce the products manufactured by the entity:
Material - RM55,000
Labour - RM65,000
Depreciation of plant and equipment used to perform the modifications - RM15,000
In January 2020 the entity's production staff were trained in how to operate the new item of equipment. Training costs included:
Cost of an expert external instructor - RM7,000
Labour - RM3,000
In February 2020 the entity's production team tested the equipment and the engineering team made further modifications necessary to get the equipment to function as intended by management. The following costs were incurred in the testing phase:
Material - RM21,000
Labour - RM11,000
Depreciation of plant and equipment used to perform the modifications - RM5,000
The equipment was only ready for use on 1 March 2020.
Required - Compute the total cost of the equipment.
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