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CA Intermediate · Advanced Accounting · Framework for Preparation and Presentation of Financial Statements

Ruchi Ltd. bought machinery for Rs 10,00,000 on 1 April. At 31 March the same machine could be bought for Rs 11,50,000, and its present value of expected net cash inflows is Rs 9,00,000. Depreciation to date is Rs 1,00,000 on historical cost basis. Measuring the machine at (a) historical cost and (b) current cost, both net of the proportionate depreciation of 10% of the respective cost, gives carrying amounts of:

Historical cost gives Rs 9,00,000 and current cost gives Rs 10,35,000. Historical cost is Rs 10,00,000 less Rs 1,00,000 depreciation. Current cost is Rs 11,50,000 less 10% depreciation of Rs 1,15,000. The present value figure is a different measurement basis.

  1. A(a) Rs 9,00,000; (b) Rs 10,35,000Correct
  2. B(a) Rs 9,00,000; (b) Rs 8,10,000
  3. C(a) Rs 10,00,000; (b) Rs 11,50,000
  4. D(a) Rs 9,00,000; (b) Rs 11,50,000

Explanation

Historical cost basis: 10,00,000 - 1,00,000 = 9,00,000. Current cost basis: 11,50,000 less 10% = 11,50,000 - 1,15,000 = 10,35,000. Present value of Rs 9,00,000 is a different basis (value in use) and is not used for either of these measures.

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