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Capital and Revenue Expenditure
XYZ Co purchased a new machine at the list price of
$250,000. The supplier offered a trade discount of 10%.
The supplier also provided that if the company settled
the balance within 10 days, a further 10% cash discount
would be given. XYZ Co promptly settled the debt, taking
the advantage of both discounts. In addition, the company
Incurred installation costs of $4,500. The total
transportation and insurance cost incurred for the shipment
of the machine amounted to $3,000 and $6,000 respectively.
$1,200 was paid to the supplier for the maintenance charge
for the current year.
Explain how each of the above figures should be
accounted for by the company. (HKAL 1998)