Question No: 3 10 Marks A manufacturing corporation has installed a plant and machinery in its factory as on 5 January, 2018. The purchase price of that plant and machinery was OMR 220,000 and on this price 8% of trade discount was included and 5% of rebates were included after deducting the trade discount. Initial delivery cost was OMR 12,500 in that 20% of which was handling cost of the whole machinery in the factory building. Cost of testing was OMR 7,500, professional fees to technician amounted to OMR 10,200 in that OMR 2.200 was included for the cost of introducing the new plant and machinery. The cost of transport to bring the plant and machinery to factory site was OMR 15,500 in that OMR 5,200 was the transport charges for replacing that equipment already functioning in the factory Administrative and other general overhead cost was OMR 9,500. Initial operating cost when the plant and machinery was operated at less than full capacity. Cost of relocating the total of the factory's operations was OMR 47,500. The payment for the purchase price of the plant and machinery was deferred to the supplier for three months beyond the normal credit terms. The interest for that amount charges for three months was at the rate of 8% per annum. Required: On the role of an accountant consider the costs relevant to the plant and machinery: a) Explain the accounting treatment of those costs to be capitalized. (6 Marks) b) Explain those costs which should not be capitalized and those costs were treated as an expenses as per the requirements of IAS 16. (4 Marks) 5/8