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

Sundaram Engineering Ltd purchased a CNC machine with a list price of ₹20,00,000 on which a 5% trade discount was allowed. Other data: non-refundable import duty ₹50,000; GST of ₹3,42,000 eligible for full input tax credit; freight inward ₹40,000; installation ₹30,000; staff training cost ₹25,000; initial operating loss before the machine reached planned performance ₹60,000. At what amount should the machine be capitalised under AS 10?

The machine is capitalised at ₹20,20,000. Cost is the price after trade discount plus non-refundable duty, freight and installation. Creditable GST, staff training and initial operating losses are not part of the cost of property, plant and equipment under AS 10.

  1. A₹20,45,000
  2. B₹20,20,000Correct
  3. C₹23,62,000
  4. D₹21,20,000

Explanation

Cost = list price net of trade discount (₹19,00,000) + non-refundable duty ₹50,000 + freight ₹40,000 + installation ₹30,000 = ₹20,20,000. GST with input credit, training cost and initial operating losses are excluded. Adding training gives ₹20,45,000, which is wrong because training is not a directly attributable cost of the asset.

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