CAF-6 · Chapter 12 · Question 7 of 15
During 20X6, Beta Ltd spent Rs. 500,000 on developing a new manufacturing process. The criteria for capitalization were met on 1 September 20X6. Costs of Rs. 300,000 were incurred before 1 September, and Rs. 200,000 after. What amount is capitalized?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 200,000
Explanation
Only costs incurred on or after the date the capitalization criteria are met can be capitalized. The Rs. 300,000 incurred before 1 September must be expensed and cannot be reinstated as an asset later.
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