John Boggis saw a computer for sale in a local store for £1,499. This was much cheaper than he’d seen it for sale elsewhere. He needed five of these PCs and also needed the cabling to network them. Following negotiations with the retailer, he obtained the machines for a total of £7,000. However, the cost of the cabling was £300 and the supplier was going to charge £500 to install the network. If John paid the total amount due before installation, he would receive a discount of 21/2 per cent. He liked this idea and paid immediately.

Subsequently, he purchased three printers costing £125 each and software costing £350, together with floppy disks and consumables costing a total of £250. The supplier gave a discount of £50 on the consumables due to the size of the order.

All of John’s staff were sent on a customised training course organised by the retailer at a total cost of £500.

Required:

(a) Calculate the amount capitalised in the balance sheet in respect of the computer equipment and also the amount to be charged to revenue accounts.

(b) ‘Materiality’ is a concept which sometimes has an effect on the capitalisation of amounts within a balance sheet. Give examples of how this may be done.