On 1 June 20X1, Galaxy Co. purchased a new machine for use in its factory. The directors have

capitalised the purchase price but are unsure how to treat the following related costs. 350,000 was

spent on testing whether the machine was functioning properly. During the testing period (June

October 20X1), samples were produced and sold for a total of 75,000. 400,000 was also spent on

training existing employees how to operate the new machine. The machine is being used to

manufacture a new product, Product C and 1 million was spent on advertising this new product.

Testing was completed and commercial production of Product C commenced on 31 October 20X1.

Required: Advise Galaxy on how the above transactions should be dealt with in its financial

statements for the year ended 31 December 20X1.