Question

Cost of Asset = Purchase price + __________.

• A. Expenses
• B. Repairs
• C. Incidental expenses
• D. None

Answer 1

The correct option is C Incidental expenses

Expenditure incurred up to the date at which the asset becomes ready to commence commercial production (i.e., production intended for sale or capitative consumption ) should bed capitalized and expenditure incurred after this cut off date should be treated as revenue expenditure.

Cost of assets includes :

1. Freight and in-transit Insurance
2. Import duties and other non-refundable taxes
3. Cartage and carriage expenses
4. Site preparation costs
5. Installation costs, such as special foundation or plant
6. Professional fees for architects and engineers
7. Expenditure incurred on test runs and experimental production
8. Borrowing cost incurred up to the date at which substantially all the activities necessary to prepare the qualifying asset for its intended use are complete.