Classification of acquisition costs

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Reference no: EM133083302

Question - Classification of acquisition costs

Nikita Ltd began operations on 1 July 2016. During the following year. the company acquired a tract of land, demolished the building on the land and built a new factory. Equipment was acquired for the factory and. in March 2017. the factory was ready. A gala opening was held on 18 March, with the local parliamentarian opening the factory. The first items were ready for sale on 25 March.

During this period, the following inflows and outflows occurred:

1. While searching for a suitable block of land, Nikita Ltd placed an option to buy with three real estate agents at a cost of $100 each. One of these blocks of land was later acquired.

2. Payment of option fees $300

3. Receipt of loan from bank 400000

4. Payment to settlement agent for title search, stamp duties and settlement fees 10000

5. Payment of arrears in rates on building on land 5000

6. Payment for land 100000

7. Payment for demolition of current building on land 12 000

8. Proceeds from sale of material from old building 5 500

9. Payment to architect 23000

10. Payment to council for approval of building construction 12000

11. Payment for safety fence around construction site 3 400

12. Payment to construction contractor for factory building 240000

13. Payment for external driveways, parking bays and safety lighting 54 000

14. Payment of interest on loan 40000

15. Payment for safety inspection on building 3 000

16. Payment for equipment 64000

17. Payment of freight and insurance costs on delivery of equipment 5600

I8. Payment of installation costs on equipment 12000

19. Payment for safety fence surrounding equipment 11 000

20. Payment for removal of safety fence 2000

21. Payment for new fence surrounding the factory 8000

22. Payment for advertisements in the local paper about the forthcoming factory and its benefits to the local community 500

23. Payment for opening ceremony 6000

24. Payments to adjust equipment to more efficient operating levels subsequent to initial operation 3300

Reference no: EM133083302

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