CMA Final · Corporate Financial Reporting · Property, Plant and Equipment (Ind AS 16)
Kaveri Engineering Ltd estimates for a machine that it could currently sell the asset for ₹12,00,000 if it were already of the age and condition expected at the end of its useful life, and disposal costs would be ₹70,000. What is the residual value under Ind AS 16?
Residual value is ₹11,30,000. It is the amount currently obtainable from disposing of the asset in its end-of-life condition, ₹12,00,000, after deducting estimated disposal costs of ₹70,000. Adding the costs instead would wrongly give ₹12,70,000.
- A₹12,70,000
- B₹12,00,000
- C₹11,30,000Correct
- D₹70,000
Explanation
Residual value is the estimated amount currently obtainable from disposal, after deducting estimated costs of disposal, if the asset were already of the age and condition expected at the end of its useful life. So 12,00,000 - 70,000 = 11,30,000. Adding the costs gives 12,70,000, which is the wrong sign.
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