Question

The formula

Modifying Upper T with underline otal cost equals Modifying Upper C with underline ost plus Modifying Upper S with underline hipping cost plus Modifying Upper I with underline nstallationTotal cost=Cost+Shipping cost+Installation

is used to find the total cost of a business asset. The formula can be written in symbols as

Tequals=Cplus+Splus+Upper II.

Solve the formula for

Upper II​,

the

installation nbspinstallation cost

of the asset.

Upper IIequals=nothing

​(Simplify your​ answer.)

Answer 1

As per AS10 accounting for fixed assets, an asset is capitalized with an amount incurred for bringing the asset to the present location and condition

So the business asset cost includes it's purchase cost, shipping cost, any taxes paid and installation costs.

However if taxes has considered as cost and capitalized then on those taxes business can not claim input tax credit.

Hence for business, value of asset = purchase cost (Underline cost)+shipping cost+installation cost+taxes paid(if any).

Installation costs (UpperII)= value of asset(T) -purchase cost-shipping cost (C)- taxes paid (if any)

Costs incurred for making the asset useable (i.e; present useable condition) an asset is referred as installation costs and

Costs incurred for bringing the asset to present location is referred as shipping costs.

Note: the symbols used are only based on question above.