ZYX Limited took a bank loan of ₹50 lakh on 1 April 2024; out of it ₹30 lakh was used for the qualifying asset (factory building) and ₹20 lakh for the machinery. Total interest for the year was ₹5,50,000. Per AS 16, what is the net borrowing cost to be capitalised?
A₹5,50,000
B₹3,30,000
C₹1,65,000
D₹2,75,000
Answer & Solution
Correct answer: B. ₹3,30,000
1. Step 1: Per AS 16, only borrowing cost attributable to a qualifying asset is capitalised.
2. Step 2: Of the ₹50 lakh loan, ₹30 lakh (60%) financed the qualifying asset.
3. Step 3: Capitalised interest = ₹5,50,000 × 60% = ₹3,30,000.
_Source: ICAI BoS CA Inter Paper 1 Practice MCQ Paper (89270bos-aps3012-int-p1), Q.5_