Solve the next question ?

The correct answer is: C $192,000

Answer C is the right option cause interest charges expensed  not capitalized according to US GAAP .

B. $184,000

The cost of an asset based on IAS16 PPE cost measurement entails the cost price (purchase price), delivery cost, and  Installation cost in this particular question. The cost of trial runs and interest will be expensed in the income statement. The interest cost will have been added if the interest is associated or being a borrowed amount specifically to acquire that asset.

Purchase price800,000

Delivery cost      50,000

Installation Cost 70,000

                            920,000      

Depreciation =920,000/4 = $184,000   

The cost to be capitalized:

Purchase  Price        800,000/-

Delivery  Cost              50,000/-

Installation Cost          70,000/-

Cost of Trial Runs      40,000/-   

Total Cost                  960,000/-

Depreciation Charge for the first year =960,000

                                                                           5  

                                                                    =192,000/-

In this case the interest cost will not be capitalized 

My answer is D. $204,000. Am i right ? 

It is D $192,000 as computed below: Capitalized Cost:

Purchase price $                     800,000 

Delivery cost                            50,000 

Installation cost                        70,000 

Cost of trial runs                                   40,000

TOTAL CAPITALIZED COST is960,000 divide5 years is192,000.

Interest Cost is not capitalized because as per IAS23 " borrowing cost" , interest cost can be capitalized but only on qualifying assets, (that takes substantial period of time to get ready for its intended use or sales). Which in here the asset do not qualify as a qualifying assets because it is purchased.

Deprecitaion will be $192,000