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KPK Ltd is installing a new plant: supplier's invoice ₹45,00,000; estimated dismantling cost after 5 years ₹3,25,000; initial operating losses before commercial production ₹4,00,000; interest to supplier for deferred credit ₹2,50,000; initial delivery and handling ₹1,85,000; site preparation ₹5,00,000; consultants' fees for advice on acquisition ₹6,75,000. What is the cost to be capitalised for the plant as per AS 10 'Property, Plant & Equipment'?
A₹61,85,000
B₹62,60,000
C₹68,35,000
D₹58,60,000
Answer & Solution
Correct answer: A. ₹61,85,000
1. Capitalise the purchase price plus directly attributable costs plus the dismantling estimate.
2. Included: invoice 45,00,000 + delivery & handling 1,85,000 + site preparation 5,00,000 + consultants 6,75,000 + dismantling 3,25,000.
3. Excluded: initial operating losses 4,00,000 and deferred-credit interest 2,50,000.
4. Total = 45,00,000+1,85,000+5,00,000+6,75,000+3,25,000 = ₹61,85,000.
_Source: ICAI BoS CA Intermediate Paper 1 (Advanced Accounting), Sept 2025 MCQ — Q.9, AS 10 Property, Plant & Equipment._
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