Southridge Company incurred the following costs related to its purchase of a new assembly line

1. Southridge Company incurred the following costs related to its purchase of a new assembly line: Purchase cost: Php 9,435,000 (including Php 435,000 freight and purchase taxes)
Recoverable purchase taxes: Php 960,000
Irrecoverable purchase taxes: Php 870,000
Installation of assembly line: Php 975,000
Training of employees: Php 195,000
Estimated repair and maintenance costs over useful life: Php 500,000
What is the amount to be recognized as asset related to the assembly line?

a.	Php 11,280,000
b.	Php 9,450,000
c.	Php 9,645,000

Solution:

Answer: b) Php 9,450,000
Note:
1.As per IAS 16-Property Plant & Equipment, Employee Training cost will not be part of Assets capitalization. unless those cost is directly associated to bring assets to required condition & use as intended by management.
2. Repair & Maintenance cost can not be part assets capitalization..

	Php
Cost of New assembly	9,435,000.00
Less:Recoverable Tax	(960,000.00)
Add:Installation cost	975,000.00
Asset to be Recognized	9,450,000.00