Ias 16 case study 1

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Ias 16 case study 1

  1. 1. CASE STUDY 1Rama Ltd purchased a plant for a gross price Rs.200million. It was given a rebate of 0.5% rebate. Thegross price includes excise duty Rs.20 million forwhich the buyer entity will get tax refund and non-refundable VAT of Rs.10 million. It has also incurredRs.15 million for transportation costs, handlingcharges and insurance, Rs.5 million for installationand Rs.3 million for testing and professional fees.It has earned Rs.0.2 million from selling goodsproduced out of testing. Rama Ltd has borrowedRs.100 million for financing the new purchase @10%. The entire process of purchase to make theoperational took nearly 15 months. Finance wasoutstanding during this period.Rama Ltd also earned Rs.0.1 million from short-termparking of the money borrowed pending payment tosupplier and meeting all costs. What should be theinitial cost of the plant ?

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