Question
Manaloto Waters Co. is a company involved in bottling spring water. The company purchased a bottling plant on January 2, 2021. The plant is made
Manaloto Waters Co. is a company involved in bottling spring water. The company purchased a bottling plant on January 2, 2021. The plant is made up of three significant components, the cost of which is as follows:
Description of the component | Cost | Residual Value | Useful life |
Engine | 1,500,000 | 500,000 | 5 years |
Conveyor belt and fittings | 2,000,000 | 0 | 8 years |
Outer structure | 800,000 | 50,000 | 3 years |
Other costs incurred in relation to the bottling plant are as follows:
Description of cost | Cost | Transaction date |
Delivery and installation | 750,000 | Jan. 5, 2021 |
Staff training | 60,000 | Jan. 15, 2021 |
Testing to ensure that the plant is fully operational before the start of production | 33,000 | Jan. 19, 2021 |
Launch party | 210,000 | Jan. 21, 2021 |
Initial operating loss | 45,000 | March 31, 2021 |
Other information: - The plant was available for use in production on February 1, 2021, although production only began on March 1, 2021. - The plant was temporarily idle during December 2021 when the factory closed down for its annual holiday period. - The company uses the straight-line method when depreciating its bottling plant (not apportioned for part of a month). - All "other costs" are considered to be incurred evenly among the three significant components of the bottling plant (i.e., where appropriate, a third of the cost is allocated to each component) - The only other asset owned by Manaloto Waters Co. is land which was purchased on December 5, 2019, for P4,000,000. Based on the above and the result of your audit, you are to provide the answers to the following: How much is the total cost of the engine, conveyor belt and fittings, and outer structure in 2021?
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