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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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