Determine the cost of the asset and the annual charge

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Reference no: EM131340967

On 1 January 2005, Zetajane Inc acquired production equipment for EUR 250,000. The following further costs were incurred:

Delivery EUR 18,000

Installation EUR 24,000

General administration costs EUR 3,000

The installation and setting-up period took three months, and a further amount of EUR 21,000 was spent on costs directly related to bringing the asset to its working condition. The equipment was ready for use on 1 April 2005.

Monthly managerial reports indicated that for the first five months, the production quantities from this equipment resulted in an initial operating loss of EUR 15,000 because of small quantities produced. The months thereafter show much more positive results.

The equipment has an estimated useful life of 14 years and a residual value of EUR 18,000. Estimated dismantling costs amount to EUR 12,500.

Determine the cost of the asset and the annual charge for the 2005 income statement related to the consumption of the economic benefits embodied in the assets.

Reference no: EM131340967

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