Question

ABC Ltd has purchased an item of plant whose details are as follows:

	$	$
Basic list price of the plant		250 000
Trade discount applicable to ABC Ltd 15% on	15% on list price
Ancillary costs:
Shipping and handling		2 500
Pre-production testing		10 000
Maintenance contract for 2 years		18 000
Site preparation costs:
Electrical cable installation	12 000
Concrete reinforcement	5 000
Concrete reinforcement	3 000
		20 000

ABC Ltd paid for the plant (excluding ancillary costs) within 30 days,
obtaining an early settlement discount of 20%.
ABC Ltd had incorrectly specified the power loading of the electrical cable
to be installed by the contractor. The cost of rectifying this error of $5
000 is included in the figure of $12 000 above. The plant has an
estimated useful life of 10 years, at the end of which there will be
compulsory costs of $10 000 to dismantle the plant and $4 000 to
restore the site to its original condition.
Required
Calculate the amount at which the initial cost of the plant should be
shown.

Answer 1

Basic list price of the plant	$ 250,000.00
Less: Trade Discount = (250,000 x 15%)	$   37,500.00
		$ 212,500.00
Shipping and handling	$     2,500.00
Pre-production testing	$   10,000.00
Site preparation costs:
Electrical cable installation (12000 -5000)	$     7,000.00
Concrete reinforcement	$     5,000.00
Concrete reinforcement	$     3,000.00	$   27,500.00
Dismantling and Restoration Cost (10000 + 4000)		$   14,000.00
Initial cost of the plant		$ 254,000.00