Reference no: EM132969636

Problem 1: Which ONE of the following items would DE recognise as subsequent expenditure on a non-current asset and capitalise it as required by IAS 16 Property, Plant and Equipment?

Option 1: DE purchased a furnace five years ago, when the furnace lining was separately identified in the accounting records. The furnace now requires relining at a cost of £400,000. When the furnace is relined it will be able to be used in DE's business for a further six years.

Option 2: DE's office building has been badly damaged by a fire. DE intends to restore the building to its original condition at a cost of £320,000.

Option 3: DE's delivery vehicle broke down. When it was inspected by the repairers it was discovered that it needed a new engine. The engine and associated labour costs are estimated to be £3,000.

Option 4: DE closes its factory for two weeks every year. During this time, all plant and equipment has its routine annual maintenance check and any necessary repairs are carried out. The cost of the current year's maintenance check and repairs was £90,000.