Question

Nitin acquired a machine in exchange of an old machine and paid ₹ 20,000 in cash. The carrying amount of the old machine was ₹ 2,00,000 whereas its fair value was ₹ 1,50,000 on the date of exchange. The historical cost of the new machine will be taken as:

Q: Answer-Nitin acquired a machine in exchange of an old machine and paid ₹ 20,000 in cash. The carrying amoun...

In this scenario, when an old machine is exchanged for a new machine and cash is also involved, the historical cost of the new machine is calculated as follows Fair Value of Old Machine Cash Paid The fair value of the old machine is 1,50,000, and cash paid is 20,000. So, the historical cost of the new machine will be 1,50,000 Fair Value of Old Machine 20,000 Cash Paid 1,70,000 Therefore, the historical cost of the new machine is 1,70,000.