06-23-2012, 05:07 PM
Solution:
All the cost will first go to “Capital Expenditure” As UMC has brought machinery for its business use and based on the information all of us know that (CE) a balance sheet account with following information .therefore all the cost will first go to “Capital
Expenditure”. (CE) contain the following information
Installing, training, or any other cost to get fixed asset ready to use. Legal, custom, carriage inward cost for buying machinery Acquiring asset cost or improvement is made to existing This account not only has cost of purchasing a fixed asset, but also includes other costs necessary to get the asset operational. Once machinery is in ready to use all CE moves to “Fixed Asset” account and ready to be depreciated.
Idea Solution 2:
Invoice Price
Add Freight and installation
Add Cost incurred at installation
Add Cost incurred damaged part installation
Training cost (not be added )
Machine Cost
Invoice Price(800,000)+ Custom duty and freight charges (50,000) + Installation and erection cost (10,000) + New part was replaced (9,000) Total Cost: 869,000
Discussion
Custom duty and freight charges is a part of direct cost because its incurred for the usage of machine that is necessary for machine reach factory.
Installation and erection cost always considered direct cost that is included the asset cost because without installation machine cannot worked.
New part replaced due to damage its considered direct cost because the machine not starting the work.
Training cost its relate to other cost head not added in machine cost even its also for usage of machine but we only added those expenses into machine cost that is necessary for running the machine.
All the cost will first go to “Capital Expenditure” As UMC has brought machinery for its business use and based on the information all of us know that (CE) a balance sheet account with following information .therefore all the cost will first go to “Capital
Expenditure”. (CE) contain the following information
Installing, training, or any other cost to get fixed asset ready to use. Legal, custom, carriage inward cost for buying machinery Acquiring asset cost or improvement is made to existing This account not only has cost of purchasing a fixed asset, but also includes other costs necessary to get the asset operational. Once machinery is in ready to use all CE moves to “Fixed Asset” account and ready to be depreciated.
Idea Solution 2:
Invoice Price
Add Freight and installation
Add Cost incurred at installation
Add Cost incurred damaged part installation
Training cost (not be added )
Machine Cost
Invoice Price(800,000)+ Custom duty and freight charges (50,000) + Installation and erection cost (10,000) + New part was replaced (9,000) Total Cost: 869,000
Discussion
Custom duty and freight charges is a part of direct cost because its incurred for the usage of machine that is necessary for machine reach factory.
Installation and erection cost always considered direct cost that is included the asset cost because without installation machine cannot worked.
New part replaced due to damage its considered direct cost because the machine not starting the work.
Training cost its relate to other cost head not added in machine cost even its also for usage of machine but we only added those expenses into machine cost that is necessary for running the machine.
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