Skip to content

CA Intermediate · Advanced Accounting · AS 10 Property, Plant and Equipment

Bharat Auto Components Ltd bought a CNC machine with a list price of ₹50,00,000 and was allowed a trade discount of ₹4,00,000. It also paid non-refundable import duty of ₹2,00,000 and GST of ₹9,00,000, for which full input tax credit is available. Other costs were freight inward ₹1,00,000, installation ₹1,50,000, cost of testing the machine before use ₹80,000, training of operators ₹60,000, and allocated general administration overheads ₹70,000. At what amount should the machine be initially recognised under AS 10?

The machine is recognised at ₹51,30,000. Cost includes the price net of trade discount, non-refundable duty, freight, installation and testing costs. GST on which credit is available, operator training and general administration overheads are not directly attributable to bringing the asset to working condition, so they are excluded.

  1. A₹51,30,000Correct
  2. B₹52,60,000
  3. C₹60,30,000
  4. D₹55,30,000

Explanation

Cost = 50,00,000 − 4,00,000 + 2,00,000 + 1,00,000 + 1,50,000 + 80,000 = ₹51,30,000. GST with ITC available, training and general overheads are not directly attributable and are excluded. Adding training and overheads gives ₹52,60,000, which is wrong. Ignoring the trade discount gives ₹55,30,000, also wrong.

Did you get it right without looking?

One question tells you little. A timed set on AS 10 Property, Plant and Equipment shows your real accuracy, how long you take and where you lose marks.

Practise AS 10 Property, Plant and EquipmentFree diagnostic mock

More AS 10 Property, Plant and Equipment questions