Question
Plant Item A At 30 June 2020 similar items of plant to Plant Item A were sold in two markets, Brisbane and Perth. The selling
Plant Item A
At 30 June 2020 similar items of plant to Plant Item A were sold in two markets, Brisbane and Perth.
The selling price in the Brisbane market is $70,000 and the selling price in the Perth market is $75,000. Transaction costs are $2,000 in the Brisbane market and $3,500 in the Perth market.
Make Ltd considers location is an important characteristic for Plant Item A. The transport costs are $750 for the Brisbane market and $1,400 for the Perth market.
There is no principal market for Plant Item A.
Required:
(a) Referring to AASB 13: Fair Value Measurement, determine the most advantageous market and calculate the fair value of Plant Item A at 30 June 2020. Show all workings.
(b) Provide one (1) reason that explains the treatment of transaction and transport costs in your calculation of the fair value for Plant Item A at 30 June 2020.
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