Undertaking project to install new plant

Reference no: EM133650392

Question

Costing of New Plant Question 1 Paradise Lighting Company is undertaking a project to install a new plant at its production facility in Ba. The project manager has provided you with the details of the following Cost:

a. Cost of preparing the site for installation $600 000

b. Consultant services used for advice on the acquisition of the plant $700 000

c. Insurance and Assurance checks made on the acquisition of the plant $400 000

d. Cost of the plant (Cost as per supplier's invoice plus taxes) $2 000 000

e. Initial delivery, duty, and handling costs $500 000

f. Estimated dismantling costs to be incurred after 7 years on disposal/replacement $250 000

g. Operating loss before commercial production $400 000

h. Interest charge paid to the supplier of plant for deferred credit $200 000

Required: Advise Paradise Lighting Company on 'which cost can be capitalized' as per IAS 16 and which costs must be expensed.

Reference no: EM133650392

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