Mohan Ltd. has an existing freehold factory property, which it intends to knock down and redevelop....

 

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Mohan Ltd. has an existing freehold factory property, which it intends to knock down and redevelop. During the redevelopment period the company will move its production facilities to another (temporary)site. The following incremental costs will be incurred: Setup costs of Rs. 5,00,000 to install machinery in the new location. Rent of Rs. 15,00,000. Removal costs of Rs. 3,00,000 to transport the machinery from the old location to the temporary location. Mohan Ltd. wants to seek your guidance as whether these costs can be capitalized into the cost of the new building. You are required to advise in line with AS 10 "Property, Plant and Equipment". Mohan Ltd. has an existing freehold factory property, which it intends to knock down and redevelop. During the redevelopment period the company will move its production facilities to another (temporary)site. The following incremental costs will be incurred: Setup costs of Rs. 5,00,000 to install machinery in the new location. Rent of Rs. 15,00,000. Removal costs of Rs. 3,00,000 to transport the machinery from the old location to the temporary location. Mohan Ltd. wants to seek your guidance as whether these costs can be capitalized into the cost of the new building. You are required to advise in line with AS 10 "Property, Plant and Equipment".

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