MEANING OF FIXED ASSETS AND COST OF FIXED ASSETS
Fixed assets are properties, plant and equipment which represent tangible resources of an organization.
Cost of fixed assets
This is the cost measured by the cash or cash equivalent price paid to obtain the asset, and to bring it to the location and condition necessary for its intended use. Thus, the purchase price, freight costs (transport), installation costs of a productive asset and other necessary incidental costs are considered as part of asset cost.
Illustration 1
An equipment for bread-making was ordered from the United State of America at an invoice price of N120,000,VAT N6,000,installation and start-up cost N55,000.What is the total cost of the machine.
Solution:
| ₦ | |
| Invoice price | 120,000 |
| Freight (transport) | 20,000 |
| VAT | 6,000 |
| Installation and start-up | 55,000 |
| 201,000 |
EVALUATION
- What are fixed assets?
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