This case study is concerned with directly attributable costs.
Facts Extravagant Inc. is installing a new plant at its production facility. It has incurred these costs:
|
1. Cost of the plant (cost per supplier’s invoice plus taxes) |
$2,500,000 |
|
2. Initial delivery and handling costs |
$200,000 |
|
3. Cost of site preparation |
$600,000 |
|
4. Consultants used for advice on the acquisition of the plant |
$700,000 |
|
5. Interest charges paid to supplier of plant for deferred credit |
$200,000 |
|
6. Estimated dismantling costs to be incurred after 7 years |
$300,000 |
|
7. Operating losses before commercial production |
$400,000 |
Required
Please advise Extravagant Inc. on the costs that can be capitalized in accordance with IAS 16.