PRC-1 · Chapter 6 · Question 48 of 100
A business purchases a second-hand machine. It pays Rs. 40,000 for the machine, Rs. 5,000 for delivery, and Rs. 15,000 to replace broken parts before it can be used. What is the capitalized cost?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Rs. 60,000
Explanation
All costs necessary to bring the second-hand asset to the location and condition intended for its operation must be capitalized. Cost = 40k + 5k + 15k = Rs. 60,000.
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