Acquisition of Non-Current Assets and Entities
A CC T1 0 0 6
CASE STUDY: TOPIC 4 - SOLUTION
FINANCIAL ACCOUNTING 1
COURSE COORDINATORS: CHEE FEI CHANG PREPARED BY: SCOTT COPELAND
FA 1 – PHUONG CASE STUDY: TOPIC 4 SOLUTION
CASE STUDY 4 – ACQUISITION OF NON-CURRENT ASSETS AND ENTITIES
At the end of his adventures in ADA Phuong had decided to purchase a new Standard Diesel Delivery Van. Phuong conservatively estimates the delivery van should provide him benefits for at least the next 5 years at which time he should be able to receive a trade in of $2,000 on an upgraded van. As noted in topic 1 the delivery van was purchased on June 25. The relevant entry Phuong made was June 25 Delivery Van GST Outlays Cash 22,000 2,200 24,200
Following your discussion on Topic 2 and the importance of following accounting standards Phuong has reviewed the purchase he made and the way he recorded it. At the time of buying the van Phuong spent an additional $8,800 (including GST) on accessories and incidental items related to the van on the recommendation of the dealer. To account for these Phuong had made a second entry as follows June 25 Van Purchase Expenses GST Outlays Cash 8,000 800 8,800
The additional expenditure can be broken down as follows (all items listed are net of GST) Complete wash and detailing of the vehicle including the application of pinstriping in Phuong’s company colours. $300 Stamp Duty and Government Taxes. $600 A set of upgraded light truck tyres that are designed to last twice as long as the factory supplied tyres. $480 A refrigeration and heating unit which allows Phuong to deliver his catering food at the appropriate temperature. $4000 Roadside Assistance Package. $520 (Guarantees a mechanic will be available24 hours a day, 7 days a week to repair any mechanical faults for the next 24 months) GPS Navigation Unit that allow Phuong to locate his next delivery point more efficiently. $1200 An upgraded suspension package to allow the van to deal with extra weight of the
CASE STUDY: TOPIC 4 - SOLUTION
FINANCIAL ACCOUNTING 1
COURSE COORDINATORS: CHEE FEI CHANG PREPARED BY: SCOTT COPELAND
FA 1 – PHUONG CASE STUDY: TOPIC 4 SOLUTION
CASE STUDY 4 – ACQUISITION OF NON-CURRENT ASSETS AND ENTITIES
At the end of his adventures in ADA Phuong had decided to purchase a new Standard Diesel Delivery Van. Phuong conservatively estimates the delivery van should provide him benefits for at least the next 5 years at which time he should be able to receive a trade in of $2,000 on an upgraded van. As noted in topic 1 the delivery van was purchased on June 25. The relevant entry Phuong made was June 25 Delivery Van GST Outlays Cash 22,000 2,200 24,200
Following your discussion on Topic 2 and the importance of following accounting standards Phuong has reviewed the purchase he made and the way he recorded it. At the time of buying the van Phuong spent an additional $8,800 (including GST) on accessories and incidental items related to the van on the recommendation of the dealer. To account for these Phuong had made a second entry as follows June 25 Van Purchase Expenses GST Outlays Cash 8,000 800 8,800
The additional expenditure can be broken down as follows (all items listed are net of GST) Complete wash and detailing of the vehicle including the application of pinstriping in Phuong’s company colours. $300 Stamp Duty and Government Taxes. $600 A set of upgraded light truck tyres that are designed to last twice as long as the factory supplied tyres. $480 A refrigeration and heating unit which allows Phuong to deliver his catering food at the appropriate temperature. $4000 Roadside Assistance Package. $520 (Guarantees a mechanic will be available24 hours a day, 7 days a week to repair any mechanical faults for the next 24 months) GPS Navigation Unit that allow Phuong to locate his next delivery point more efficiently. $1200 An upgraded suspension package to allow the van to deal with extra weight of the