More Related Content
Similar to 13.2 The “cost” of a Non-Current Asset
Similar to 13.2 The “cost” of a Non-Current Asset (20)
More from VCE Accounting - Michael Allison
More from VCE Accounting - Michael Allison (20)
13.2 The “cost” of a Non-Current Asset
- 2. © Michael Allison. Author’s permission required for external use.
In order to calculate depreciation, it is important to fully understand the
meaning of the “cost” of a non-current asset
Accounting reporting guidelines state that the cost of an Asset will include:
13.2 THE “COST” OF A NON-CURRENT ASSET
The purchase (invoice) price of the asset – or its agreed value
+
• Any costs required to get it in a capacity and location to earn revenue
• Which will provide an economic benefit for the life of the asset. E.g.
• Delivery fees
• Installation costs
• Taxes
- 3. © Michael Allison. Author’s permission required for external use.
• Any costs required to get it in a capacity and location to earn revenue
• Which will provide an economic benefit for the life of the asset. E.g.
• Delivery fees
• Installation costs
• Taxes
13.2 THE “COST” OF A NON-CURRENT ASSET
The purchase (invoice) price of the asset – or its agreed value
Other PartyBusiness
2015 2016 2017
Will last a lifetime:
• Delivery fees
• Installation costs
• Taxes
Will not last a lifetime:
• Insurance
• Registration
• Service agreement
Will not last a lifetime:
• Insurance
• Registration
• Service agreement
Will not last a lifetime:
• Insurance
• Registration
• Service agreement
- 4. © Michael Allison. Author’s permission required for external use.
Example 1: a firm purchased a new vehicle:
Purchase price: $20,000 (plus
$2,000 GST)
Stamp duty: $1,000
Dealer fees and charges: $500
Insurance and registration:
$800 per year
Total cost = $21,500
Purchase price:
$20,000
Stamp duty: $1,000
Dealer fees and
charges: $500
Purchase price: $20,000 (plus
$2,000 GST)
Stamp duty: $1,000
Dealer fees and charges: $500
Insurance and registration:
$800 per year
13.2 THE “COST” OF A NON-CURRENT ASSET
- 5. © Michael Allison. Author’s permission required for external use.
Stamp duty: $1,000
Dealer fees and charges: $500
Insurance and registration: $800 per year
• Required to get the vehicle in a
capacity and location to earn
revenue
• Will provide an economic benefit for
the life of the asset – they are only
paid once at the start of the asset’s
life
• Is it required to get the vehicle in a
capacity and location to earn
revenue?
• And won’t last for the life of the asset
– will need to be repaid every year
13.2 THE “COST” OF A NON-CURRENT ASSET
- 6. © Michael Allison. Author’s permission required for external use.
Example 2: a firm purchased a new computer:
Purchase price: $10,000 (plus
$1,000 GST)
Installation fee: $2,000
Service contract: $200 per year
Total cost = $12,000
Purchase price: $10,000 (plus
$2,000 GST)
Installation fee: $2,000
Purchase price: $10,000 (plus
$1,000 GST)
Installation fee: $2,000
Service contract: $200 per year
13.2 THE “COST” OF A NON-CURRENT ASSET
- 7. © Michael Allison. Author’s permission required for external use.
Installation fee: $2,000 Service contract: $200 per year
• Required to get the vehicle in a
capacity and location to earn
revenue
• Will provide an economic benefit for
the life of the asset – only paid once
at the start of the asset’s life
• Not required to get the vehicle in a
capacity and location to earn
revenue
• And won’t last for the life of the asset
– will need to be repaid every year
13.2 THE “COST” OF A NON-CURRENT ASSET
- 8. © Michael Allison. Author’s permission required for external use.
TASK
In-class Homework
SQ3 X
SQ4 X