Tom Ltd. bought a new machine. The cost of the machine was £10,000. The installation costs were £1,000 and the employees received specific training on how to use this particular machine, at a cost of £200. Before using the machine to make parts, a test was performed, and the oil and initial parts required for this test cost £50. It costs £100 to insure the machine for the year.
What should the cost of the machine be in the balance sheet?

Question

Quizplus · Accepted Answer

The cost of the machine on the balance sheet should include all costs necessary to bring the asset to its intended use. This includes the purchase price (£10,000), installation costs (£1,000), training costs (£200), and testing costs (£50), totaling £11,250. Insurance is not included as it is an ongoing expense.

Tom Ltd Bought a New Machine