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How much should the machineries be initially recognized

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Reference no: EM132829166

On January 1, 2020, MAMA company purchased several machineries that will be used in the production of goods at a purchase price of P1,000,000. MAMA company paid import duties of P10,000 and non-refundable purchase taxes of P5,000. MAMA company also incurred a P30,000 installation and assembly cost. The company expects that it will incur dismantling cost amounting to P132,275 at the end of the machinery's 5-year useful life. The prevailing market rate of interest during the transaction were date was 12%.

PV factors are as follows:

  1. PV of 1 at 12% for 5 periods: 0.567
  2. PV of ordinary annuity at 12% for 5 periods: 3.6048

Problem 1: How much should the machineries be initially recognized?

Option 1: 1,045,000
Option 2: 1,120,000
Option 3: 1,177,275
Option 4: 1,521,825

Reference no: EM132829166

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