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    • Question

      Machine cost ₹50 lakh depreciated SLM over 10 years;

      after 5 years, component worth ₹10 lakh replaced at ₹12 lakh. Accounting treatment?
      A Debit repair expense ₹12 lakh Correct Answer Incorrect Answer
      B Capitalise ₹12 lakh, derecognise WDV of replaced component Correct Answer Incorrect Answer
      C Capitalise ₹12 lakh, don't touch WDV Correct Answer Incorrect Answer
      D Expense ₹10 lakh, capitalise ₹2 lakh Correct Answer Incorrect Answer
      E Ignore component accounting Correct Answer Incorrect Answer

      Solution

      Under component accounting, derecognise old component and capitalise replacement. Excess cost adjust to asset cost or OCI depending on revaluation.

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