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Depreciation Treatment for Product Costs

The document discusses depreciation accounting for various products in an annual report. It states that blast furnace relining costs are capitalized as they facilitate continued hot metal production. Relining expenses other than for blast furnaces are treated as period costs and expensed in the year incurred. The document also notes that Rs. 1.08 crores spent on research and development was depreciated and amortized in the same year rather than being treated as a product cost.

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Anshul Pandey
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5 views1 page

Depreciation Treatment for Product Costs

The document discusses depreciation accounting for various products in an annual report. It states that blast furnace relining costs are capitalized as they facilitate continued hot metal production. Relining expenses other than for blast furnaces are treated as period costs and expensed in the year incurred. The document also notes that Rs. 1.08 crores spent on research and development was depreciated and amortized in the same year rather than being treated as a product cost.

Uploaded by

Anshul Pandey
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Question:5- Using capacity, production and segment data given for various products in the annual report, determine

the amount of depreciation for any one product that should not be added to product cost but be treated as a period cost. (Assume depreciation to be a fixed cost). Answer- Blast furnace relining is to facilitate relining of other stoves, without hampering or obstructing the hot metal production. Tangible assets are stated at cost less accumulated depreciation and net of impairment. Preoperation expenses including trial run expenses are capitalised. Thus, Blast Furnace relining was capitalised. The written down value of the asset consisting of relining expenditure embedded in the cost of furnace was written off in the year of fresh relining. Relining expenses for the financial year 2012 was 116 crores. Relining expenses other than expenses on blast furnace relining are charged as an expense in the Statement of Profit and Loss in the year in which they are incurred. Depreciation and Amortisation expenses include Rs.1.08 crores in respect of research and development activities undertaken during the year. An expense of Rs.1.08 crores in activities of Research and Development undertaken during the year was depreciated and amortised in the same year.

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