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

  1. What are fixed assets?

Lesson tags: Financial Accounting Lesson Notes, Financial Accounting Objective Questions, SS1 Financial Accounting, SS1 Financial Accounting Evaluation Questions, SS1 Financial Accounting Evaluation Questions Third Term, SS1 Financial Accounting Objective Questions, SS1 Financial Accounting Objective Questions Third Term, SS1 Financial Accounting Third Term
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