Question

ABC Corporation purchased a machine on January 1, 2017, for $56,000. Before the machine was utilized in a productive capacity, it was needed to build a support in value of $4,000 to accommodate the machine, and to train an operator for using the machine ($2,000). For security reasons, a 5-years insurance policy was purchased for the machine in value of $5,000.

Depreciation on the machine was recorded at the end of each year. The depreciation rate is $6,200 per year. On February 1, 2020, the machine was sold for $45,000.

As a result of sale, ABC Corporation records a:

Gain 2.633

Loss 2.633

Gain 45.000

Loss 1.600

Answer 1

Particulars	Amount
Purchase Price	56000
Support In	4000
Total to be capitalized	60000
Depreciation 2017	6200
Depreciation 2018	6200
Depreciation 2019	6200
Depreciation 2020 for 1Month	517
Carrying Amount	40883
Sale Value	45000
Gain	4117
Unexpired Insurance for 1year and 11 months to be written off	1917
(5000*23/60)
Net Gain	2200

The above answer is correct as per IAS 16. But the above 4 options does not have this answer.

Training expenses shall be expensed off in the year in which it is incurred.