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An old machinery is purchased for Rs. 10,000. Installation charges of Rs. 1,000 were incurred. Repairs to the old machinery = Rs. 7,000 Repairs Account will be debited by:
- a)Rs. 7,000
- b)Rs. 8,000
- c)Nil
- d)None of the above
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
An old machinery is purchased for Rs. 10,000. Installation charges of ...
Explanation:
When the old machinery is purchased, the cost of the machinery along with any additional expenses incurred to make it functional are recorded as the cost of the machinery. These expenses include installation charges, freight charges, etc.
In this case, the old machinery was purchased for Rs. 10,000 and installation charges of Rs. 1,000 were incurred. Therefore, the total cost of the machinery would be Rs. 11,000 (10,000 + 1,000).
However, repairs to the old machinery were also done which cost Rs. 7,000. Repairs are not considered as a part of the cost of the machinery. Repairs are expenses incurred to maintain the machinery in working condition. Hence, repairs account will be debited by nil.
Therefore, the correct option is C, i.e., nil.
To summarize:
• The cost of the machinery includes the purchase cost along with any additional expenses incurred to make it functional.
• Repairs to the machinery are not considered as a part of the cost of the machinery.
• Repairs account will be debited by nil.
When the old machinery is purchased, the cost of the machinery along with any additional expenses incurred to make it functional are recorded as the cost of the machinery. These expenses include installation charges, freight charges, etc.
In this case, the old machinery was purchased for Rs. 10,000 and installation charges of Rs. 1,000 were incurred. Therefore, the total cost of the machinery would be Rs. 11,000 (10,000 + 1,000).
However, repairs to the old machinery were also done which cost Rs. 7,000. Repairs are not considered as a part of the cost of the machinery. Repairs are expenses incurred to maintain the machinery in working condition. Hence, repairs account will be debited by nil.
Therefore, the correct option is C, i.e., nil.
To summarize:
• The cost of the machinery includes the purchase cost along with any additional expenses incurred to make it functional.
• Repairs to the machinery are not considered as a part of the cost of the machinery.
• Repairs account will be debited by nil.
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An old machinery is purchased for Rs. 10,000. Installation charges of ...
Reparing charges paid for asset it is added to assets not repair account
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An old machinery is purchased for Rs. 10,000. Installation charges of Rs. 1,000 were incurred. Repairs to the old machinery = Rs. 7,000 Repairs Account will be debited by:a)Rs. 7,000b)Rs. 8,000c)Nild)None of the aboveCorrect answer is option 'C'. Can you explain this answer?
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