Question

A manufacturing company spent the following amounts on the import and installation of machine.

A. Rs. 50,000	Price of the machine
B. Rs. 5,000	Freight
C. Rs. 1,050	Insurance premiun
D. Rs. 6,000	Replacement of a part damaged intransit, not covered under the insurance policy

Based on the data, capital expenditure would be:

• A. Rs. 50,000
• B. Rs. 56,050
• C. Rs. 62,050
• D. Rs. 51,050

Answer 1

Answer: (C)

Rs. 62,050

The cost of an item of fixed asset comprisesits purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition foritsintended use; any trade discounts and rebates are deducted in arriving at the purchase price. Examples of directly attributable costs are:

(i) site preparation;

(ii) initial delivery and handling costs;

(iii) installation cost, such as special foundations for plant; and

(iv) professional fees, for example fees of architects and engineers.

As per the above provision, capital expenditure would be:

Purchase price 50000

Add: freight 5000

Insurance premium 1050

Replacement of a part damaged in transit,

not covered under the insurance policy. 6000

_____________

62050