Question

Kim Limited operates a cycle courier business which owns several bicycles. According to the NZ Framework, at what value could Kim report these cycles for financial statements purposes? (Select the best answer!) a. present value b. current cost only c. historical cost only d. historical cost, or fair value e. Realistic value, or present value t Goldmine Limited purchases a second-hand fire engine for use in its mining operations. Costs incurred were: Cost ex Auckland dealer $25,000+ Delivery charges $1,000- Reconditioning of engine $2,000+ Registration (one-off) $800+ Repaint before use $400+ Diesel $150- Annual registration $250+ At what value should this fire engine initially be recorded in Goldmine Limited's financial statements?

Answer 1

Answer:

C)Historical cost is the most situable option.

Reason:

Because all these cycles are of courier purpose and all these should be reported on Historical cost.

Elements recognised in financial statements are quantified in monetary terms. Historical cost measures provide monetary information about assets, liabilities and related income and expenses, using information derived, at least in part, from the price of the transaction or other event that gave rise to them. Unlike current value, historical cost does not reflect changes in values, except to the extent that those changes relate to impairment of an asset or a liability becoming onerous.

Reporting on present value or current cost or fair value willnot be good for these cycles, because anyhow they shuold be delivered to right owner .

2nd Answer:

Value of Fire Engine in Goldmines limited financial statement

Particulars Amount $

Cost of Ex Auckland dealer 25,000

Delivery Charges 1000

Reconditioning of Engine 2000

Registration (one - off) 800

Repaint Before use 400

Diesel       150

Total 29350

The Fire engine initially should recorded at 29,350 in Goldmines financial statements.

**Annual registration cost shouldnot be taken in calculation of Asset cost, because it a annual cost and its will be incurred regularily and hence its a recurring expense.