Please Help: as -16

Posted Date : 04-Oct-2011 , 07:20:19 pm | Posted By anu jain

A raised 10% loan of RS. 100000 on 1.7.2004 to meet the cost of construction of an asset. The total cost construction of an asset (completed on 31.12.2004) came to rs 200000. The amount borrowed for construction was temporarily invested by A in short term deposit which earned interest of rs.2000.the cost of asset as on…
Ive done this:- 100000*10%*6/12=5000-2000=3000+200000= 203000.

Category : Accounts | Answers : 3 | Comments : 1 | Hits : 416

Answers

Answer By: Ashish Karundia

Anu, Your understanding is correct (Kudos for that). The amount to be capitalized in the instant case will be Rs. 3,000 only (i.e. 5,000 - 2,000).

In this regard, you can refer para 10 and 11 of Accounting Standard - 16 'Borrowing Cost' issued by the ICAI.

Hope the above answers your query.

Answer By: CA VIPIN GARG

You are perfect in your approach Anu Ji, Good going, have a nice day and please ask any further query, if u have ...........

Answer By: Ketan Samdani

The calculation done by you is correct.