Al Nava Corporation has incurred the following costs in relation to the construction of factory and...
Al Nava Corporation has incurred the following costs
in relation to the construction of factory and for the introduction
of its products to the domestic market. Cost of site preparation
was for OMR 480,000, usage of materials for construction was OMR
3,000,000, labor cost incurred OMR 6,380,000 which included
industrial dispute payment of OMR 180,000 and also cost of labor
utilized in the normal production process was OMR 600,000. The
factory had undergone many processes for testing and the cost was
OMR 300,000. Certain equipment was reinstalled for which
consultancy fees were paid to experts which were amounted to OMR
440,000. The staffs were relocated to new factory at a cost of OMR
1,000,000 Cost of dismantling the factory after its useful life of
10 years was OMR 200,000. During these 10 years, some equipment was
replaced at a cost of OMR 250,000 and two plants were enhanced for
the increased units of production at a cost of OMR 200,000.
Required:
a) On the role of an accountant provide information about how much
of the costs should be capitalized in the factory?
b) Critically analyze and justify your answer by notes
on treatment of each of the costs are to be capitalized and not to
be capitalized in the above scenario.
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Al Nava Corporation has incurred the following costs
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