Question

Nash Co. recently installed some new computer equipment. To prepare for the installation, Nash had some electrical work done in what was to become the server room, costing $21,000. The invoice price of the server equipment was $191,000. Three printers were also purchased at a cost of $2,300 each. The software for the system was an additional $42,400. The server equipment was believed to have a useful life of eight years, but due to the heavy anticipated usage, the printers were expected to have only a four-year useful life. The software to run the system was estimated to require a complete upgrade in five years to avoid obsolescence. Additionally, it cost $13,100 for delivery. All of the above costs were subject to a 6% non-refundable provincial sales tax. During the installation, a training course was conducted for the staff that would be using the new equipment, at a cost of $9,730. Assume that Nash follows IFS, and that any allocation of common costs is done to the nearest 1% (e.g.. 80%, 6%. 14%). (b) Assume that Nash decides to capitalize the following components of the computer system: server equipment, printers, and software. Calculate the amount to be capitalized for each of these asset groups. (Round percentage to O decimal places, e.g. 52% and final answers to O decimal places, e.g. 5,275.)

Cost
Server equipment
Printers
Software

Answer 1

- Server Equipment: $191,000 × 100% = $191,000

- Printers: $2,300 × 3 × 100% = $6,900

- Software: $42,400 × 100% = $42,400

Step-by-step explanation:

Nash Co. follows the IFS (Integrated Framework for Sustainability) and decides to capitalize the server equipment, printers, and software. The cost allocation is based on the useful life of each component. For the server equipment with an eight-year useful life, the full cost of $191,000 is capitalized. The printers, expected to last four years, are capitalized at $6,900 (3 printers × $2,300 each). The software, with a five-year upgrade cycle, is fully capitalized at $42,400.

It's important to note that the provincial sales tax of 6% is non-refundable and is included in the capitalized cost. Additionally, the delivery cost of $13,100 is not capitalized as it's a common cost that doesn't directly contribute to the asset's value.

IFS (Integrated Framework for Sustainability) emphasizes a comprehensive approach to asset management, considering not only financial aspects but also environmental and social factors. This approach aligns with Nash Co.'s commitment to sustainability, ensuring responsible and transparent practices in their asset capitalization.