On the 1 July 2019 Bearing Ltd, acquired production equipment in the amount of $650 000. The following further costs were incurred:

Delivery

Pre-Production Testing

Installation

General administration costs of an indirect nature $ 26 000

The installation and setting up period took two (2) months, and an additional $42 000 was spent on cost directly related to bringing the asset to its working condition. The equipment was ready for use on September 1, 2019.

Monthly managerial reports indicated that for the first five months, the production quantities from this equipment resulted in an initial operating loss (incurred evenly) of $ 30 000 because of small quantities produced. The months thereafter showed much more positive results. The equipment has an estimated useful life of 10 years and a residual value of $ 65 000. Estimating dismantling cost are $55,000.

On January 1, 2020, the estimated life of the asset was revised to be 12 years.

(i) Calculate the cost of the asset (5 marks)

(ii) Determine the annual charges in the Statement of Comprehensive Income related to the consumption of the economic benefits embodied in the assets for the years ended December 31, 2019 and 2020.

$62 500 $ 27,500