CA Inter P1 · Chapter 3 · Question 4 of 16
Case: Indus Polymers Ltd purchased a machine with a list price of ₹12,00,000, on which a 5% trade discount was allowed. GST of ₹2,05,200 was paid, for which full input tax credit is available. Other costs: freight ₹30,000; installation ₹45,000; testing ₹20,000, with net proceeds of ₹8,000 from samples produced during testing; general administration overheads ₹15,000; initial operating losses before the machine reached planned output ₹25,000. The cost of the machine under AS 10 is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) ₹12,27,000
Explanation
Purchase price net of trade discount = 12,00,000 x 95% = 11,40,000. Add freight 30,000, installation 45,000 and testing 20,000 less sample proceeds 8,000: cost = ₹12,27,000. Recoverable GST, general administration overheads and initial operating losses are not part of the cost of an item of PPE under AS 10.
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