Question
Nitin acquired a machine in exchange of an old machine
and paid ₹ 20,000 in cash. The carrying amount of the old machine was ₹ 2,00,000 whereas its fair value was ₹ 1,50,000 on the date of exchange. The historical cost of the new machine will be taken as:Solution
In this scenario, when an old machine is exchanged for a new machine and cash is also involved, the historical cost of the new machine is calculated as follows: Fair Value of Old Machine + Cash Paid The fair value of the old machine is ₹1,50,000, and cash paid is ₹20,000. So, the historical cost of the new machine will be: ₹1,50,000 (Fair Value of Old Machine) + ₹20,000 (Cash Paid) = ₹1,70,000 Therefore, the historical cost of the new machine is ₹1,70,000.
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