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    Question

    Company X acquired equipment costing ₹5,00,000 on

    1-Jan-Year1; useful life 5 years, no residual. It capitalises borrowing costs of ₹30,000 related to the purchase. Total capitalised cost = ? Depreciation in Year1 using straight line (full year) = ?
    A ₹5,30,000; Dep ₹1,06,000 Correct Answer Incorrect Answer
    B ₹5,00,000; Dep ₹1,00,000 Correct Answer Incorrect Answer
    C ₹5,30,000; Dep ₹1,05,000 Correct Answer Incorrect Answer
    D ₹5,30,000; Dep ₹1,06,000 Correct Answer Incorrect Answer

    Solution

    Total Capitalised Cost = Purchase Cost + Capitalised Borrowing Costs = 5,00,000 + 30,000 = ₹5,30,000. Annual Depreciation = Capitalised Cost / Useful Life = 5,30,000 / 5 = ₹1,06,000.

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