CA Inter P1 · Chapter 3 · Question 10 of 16
Case: On 1 April, Deccan Infra Ltd borrowed ₹50,00,000 at 10% p.a. specifically to construct a qualifying asset, which was completed on 31 March of the following year. Pending use, ₹20,00,000 of the loan was invested for 6 months at 7% p.a. Borrowing cost to be capitalised under AS 16 is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) ₹4,30,000
Explanation
Borrowing cost on the specific loan = 50,00,000 x 10% = 5,00,000. AS 16 requires investment income on the temporary investment of the borrowed funds to be deducted: 20,00,000 x 7% x 6/12 = 70,000. Amount capitalised = 5,00,000 - 70,000 = ₹4,30,000.
More Assets Based Accounting Standards MCQs
- Q12Under AS 19, Leases, which of the following situations would normally lead to classification of a lease as a finance lease?
- Q13Case: Under a finance lease, the fair value of a machine taken by Ruchi Packaging Ltd is ₹5,00,000 and the present value of minimum lease…
- Q14Case: Prism Biotech Ltd incurred the following on a new vaccine project during the year: research phase ₹4,00,000; development phase…
- Q15Case: A cash-generating unit of Neela Glass Ltd has a carrying amount of ₹12,00,000. Its net selling price is ₹9,50,000. It is expected to…
- Q16Case: An asset of Tapti Motors Ltd cost ₹10,00,000 with a 10-year life and nil residual value (straight-line). At the end of year 2 it was…