SOLUTION OF IPCC ADVANCED ACCOUNTING SOLUTION MAY 2010 (PAPER-5)

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Originally posted by : S.Srikanth
	MAY 2010 IPCC Group 2 ADVANCED ACCOUNTING SOLUTION(PAPER-5)

 Solution 1(iii) As per AS 16- "Borrowing Costs", borrowing costs that are directly attributable to acquision, constrution or production of qualifying assets should be capitalised as part of cost  the Capital Assets. Other borrowing costs are recognized as expenses in the period in which they are incurred.

Rat of interest  65/500= 13%

Qualifying assest : Rs 320 Lacs (cost of plant and machinery) + Rs 50 Lacs (advances to suppliers of capital assets) = Rs 370 lacs , 13% thereof Rs 48.10 Lacs interest, will be capitalised and balance 65-48.10 = Rs 16.90 lacs will be charged as revenue expenditure to P&L Account

nice

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