Kelly Cakes Bakery purchases a new building to use for its baking operations. In addition to the purchase price, the acquisition requires the company owner to pay a commission to a realtor and fees to an attorney. The realtor commissions and legal fees will be expensed in the current period. True / False?

Question

Clara Holloway

Business

25 March, 10:09

Kelly Cakes Bakery purchases a new building to use for its baking operations. In addition to the purchase price, the acquisition requires the company owner to pay a commission to a realtor and fees to an attorney. The realtor commissions and legal fees will be expensed in the current period. True / False?

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Answers (1)

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Sariah Tran · Answer 1

False

Explanation:

Cost of Property, Plant and Equipment Item according to IAS 16 includes : Purchase Cost and other Costs directly incurred to put the asset in the location and condition intended by the managers.

Thus, The realtor commissions and legal fees are part of costs to put the asset in the location and condition intended by the managers and hence included in cost of Building.

They are therefore not expensed in the current period