IA 1 (27-Machinery)

Flashcard 2: Is installation and testing cost capitalized?

Yes, installation and testing costs are capitalized.

Flashcard 3: How is dismantling cost treated?

Initial estimate of dismantling, removing and restoration cost is capitalized.

Flashcard 4: Is VAT part of machinery cost?

No, VAT is not capitalized; it is recorded as input tax.

Flashcard 5: What if tax is irrevocable/nonrefundable?

Nonrefundable tax is capitalized as part of the machinery cost.

Flashcard 6: How is removal cost of old machine treated?

Removal cost is expensed if not previously provided.

How are tools classified?

Tools are classified as machine tools and hand tools and recorded separately from machinery.

How are patterns and dies (designing product) treated?

For regular production → asset (depreciated) / For special order → part of product cost.

Are vehicle registration fees capitalized?

No, they are expensed.

Flashcard 10: How are large returnable containers treated?

Classified as property, plant and equipment.

Flashcard 6: How is removal cost of old machine treated?

Removal cost is expensed if not previously provided.

How are tools classified?

Tools are classified as machine tools and hand tools and recorded separately from machinery.

How are patterns and dies (designing product) treated?

For regular production → asset (depreciated) / For special order → part of product cost.

Are vehicle registration fees capitalized?

No, they are expensed.

Flashcard 10: How are large returnable containers treated?

Classified as property, plant and equipment.

Flashcard 11: How are small returnable containers treated?

Classified as other noncurrent assets.

Flashcard 12: What about nonreturnable containers?

Expensed outright.

Flashcard 13: What is a capital expenditure?

An expenditure that benefits future periods.

What is a revenue expenditure?

An expenditure that benefits only the current period.

Flashcard 15: When is subsequent cost capitalized?

When it increases future economic benefits and is measurable.

When is subsequent cost expensed?

When it only maintains current performance.

What are additions?

Additions increase size or capacity of asset and are capitalized. (new unit or expansion)

What are improvements?

Improvements increase efficiency or life of asset and are capitalized.

Flashcard 19: What are replacements?

Replacement substitutes old part with new one.

Flashcard 20: What are ordinary repairs?

Minor repairs (frequently encountered) that are expensed.

Flashcard 21: What are extraordinary repairs?

Major repairs that extend life and are capitalized.

Flashcard 22: Are rearrangement costs (relocation) capitalized?

No, they are expensed.

Flashcard 27: What if original cost cannot be identified?

Use discounted replacement cost as estimate.