Nutty Baker is a sole proprietor and not registered as a VAT vendor (that is, they don't charge VAT on thelr sales and can't claim VAT back on purchases made from SARS). Nutty Baker bakes bread, pastries, cakes, cookles, bagels, pastries and pies. The curent fnancial year-end of Nutty Baker is 28 February $$ 20 imes 2 $$. Nutty Daker purchased a new industrial oven on 20 January $$ 20 imes 2 $$ from a registered VAT vendor at aprice of R113 000 (this price excludes VAT charged at $$ 15 \% $$. The oven was installed by a non-registered VAT vendor for R6 000 on 25 January $$ 20 imes 2 $$. The oven was ready for use as intended by management on 1 February $$ 20 imes 2 $$. What cost should the oven be recognised at initially? Type volur answer.

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Nutty Baker is a sole proprietor and not registered as a VAT vendor (that is, they don't charge VAT on thelr sales and can't claim VAT back on purchases made from SARS). Nutty Baker bakes bread, pastries, cakes, cookles, bagels, pastries and pies. The curent fnancial year-end of Nutty Baker is 28 February $$ 20 	imes 2 $$. Nutty Daker purchased a new industrial oven on 20 January $$ 20 	imes 2 $$ from a registered VAT vendor at aprice of R113 000 (this price excludes VAT charged at $$ 15 \% $$. The oven was installed by a non-registered VAT vendor for R6 000 on 25 January $$ 20 	imes 2 $$. The oven was ready for use as intended by management on 1 February $$ 20 	imes 2 $$. What cost should the oven be recognised at initially? Type volur answer.

UpStudy AI · Accepted Answer

Nutty Baker isn’t VAT‐registered, so even though the supplier adds VAT, Nutty Baker cannot reclaim it. This means that the full VAT-inclusive amounts (plus any additional directly attributable costs) should be included in the cost of the oven.

1. Purchase price: R113,000 (excluding VAT).
2. VAT on the oven: 15% of R113,000 = R16,950.
  Total for the oven = R113,000 + R16,950 = R129,950.
3. Installation cost: R6,000 (no VAT since the installer is not VAT‑registered).

Thus, the total cost to be recognized initially is:
  R129,950 + R6,000 = R135,950.

So the oven should be capitalized at R135,950.
The oven should be recognized at an initial cost of R135,950.

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