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March 28, 2024, 08:40:10 pm

Author Topic: Cost of a NCA  (Read 937 times)  Share 

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Seamus Wong

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Cost of a NCA
« on: June 19, 2019, 07:45:43 pm »
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Hello,

Could someone show me whether or not this answer is correct and let me know how to improve it? can you write down how you would answer it?

Explain and justify how you would treat the cost of $2400 for the suspension system and its installation (fitted by the firms mechanic after the firm purchased a new Ute)

The $2400 expense incurred for the purchase and installation of the suspension system must be added to the total cost price of the NCA recorded on the balance sheet. This was an expense incurred to bring the asset to a revenue earning capacity, and thus adding it to the cost price of the NCA ensures the information presented in the firm's balance sheet is complete - upholding the demands of faithful representation.


Thanks
« Last Edit: June 19, 2019, 07:49:27 pm by Seamus Wong »

dunno2012

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Re: Cost of a NCA
« Reply #1 on: July 16, 2019, 08:32:43 am »
+1
Your answer looks pretty good! Only thing that I would add is that the addition of the suspension system will help provide future economic benefits in terms of revenues over its useful life and that the installation is a "one-off payment" that will not be recurring throughout the useful life.