Question

In the beginning of the financial year CAS Ltd. purchased a new machine and made the following payments In relation to it:
Rs. Rs.
Cost as per supplier's list 10,40,000 -
Less: Agreed discount 1,00,000 9,40,000
Delivery charges 20,000
Erection charges 40,000
Annual maintenance charges 60,000
Additional Components to increase capacity of the machine 80,000
Annual insurance premium 10,000
The cost of the machine is

• A. Rs. 10,80,000
• B. Rs. 10,90,000
• C. Rs. 9,40,000
• D. Rs. 11,00,000

Answer 1

The correct option is A Rs. 10,80,000

Cost as per supplier list - 1040000

Less : Agreed discount - 100000 = 940000

Delievery charges +20000

Erection charges + 40000

Additional components +80000

cost of machine = 1080000

Here, Annual maintenance charges and annual insurance premium are expenses ; both expenses are recurring in nature so it will not be part of cost of machine.