Does anyone know what is the correct way to account for a reverse assembly of a product.
You buy a (finished product) machine into inventory at R100,000 consisting of multiple parts.
You then strip down the machine into its various parts. For purposes of understanding, lets assume that the total number of parts are 20 parts. As you strip the parts you allocate them a cost. DR Parts Inventory and CR Machine Inventory. After 10 parts you have already reached the original value of the machine, however there are still another 10 parts on the machine that have a value and that need to be put into inventory.
1)What would the correct accounting entries be for the revaluation of the inventory (ie the parts that have a value above the original value of the machine)?
2)Once you have striped all parts from the machine how would you remove (accounting entries) the machine(stock unit) from inventory ?
3)How would you account for all the costs related to the removal of the parts, ie would you capitalise this against the stock?
I would appreciate any help in this regard.