XYZ associates purchased a new plant for Rs.500000 and spent Rs.40,000 on its erection and commissioning....

 

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XYZ associates purchased a new plant for Rs.500000 and spent Rs.40,000 on its erection and commissioning. However the amount of Rs.40,000 being erection commissioning expenses was debited to profit and loss A/c as a part of miscellaneous expenses. The plant is subject to depreciation at 15% p.a. What is the net effect of this transaction on profit and loss of the firm? A profit overstated by Rs.6,000 B C D profit understand by Rs.34,000 no effect on profit profit reduced by Rs.40,000. XYZ associates purchased a new plant for Rs.500000 and spent Rs.40,000 on its erection and commissioning. However the amount of Rs.40,000 being erection commissioning expenses was debited to profit and loss A/c as a part of miscellaneous expenses. The plant is subject to depreciation at 15% p.a. What is the net effect of this transaction on profit and loss of the firm? A profit overstated by Rs.6,000 B C D profit understand by Rs.34,000 no effect on profit profit reduced by Rs.40,000.

Answer rating: 100% (QA)

D profit reduced by Rs 40 000 Dep reciation expense for the year 500 000 40 000 0 15 ... View the full answer