MCQ for CA Final FR - Chapter 4 Ind AS 23 & 36 : Borrowing Costs & Impairment of Assets

Sample Multiple Choice Questions (MCQ's) for CA Final - Paper 1 - Financial Reporting - Chapter 4: INDIAN ACCOUNTING STANDARD 23 & 36 : Borrowing Costs & Impairment of Assets :  - For Practice relevant for May/Nov 23 Examinations


Q:1 An entity constructs a new head office building commencing on 1st September 20X1, which continues till 31st December 20X1. Directly attributable expenditure at the beginning of the month on this asset are ₹ 100,000 in September 20X1 and ₹ 250,000 in each of the months of October to December 20X1.
The entity has not taken any specific borrowings to finance the construction of the asset but has incurred finance costs on its general borrowings during the construction period. During the year, the entity had issued 10% debentures with a face value of 20 lacs and had an overdraft of ₹ 500,000, which increased to ₹ 750,000 in December 20X1. Interest was paid on the overdraft at 15% until 1 October 20X1, then the rate was increased to 16%
Calculate the capitalization rate for computation of borrowing cost in accordance with Ind AS 23 “Borrowing Costs”


  1. 3.663.756%6%
  2. 3.576%
  3. 3.756%
  4. 3.560%

Answer: 3


Q:2 X Ltd is commencing a new construction project, which is to be financed by borrowing. The key dates are as follows:
(i)15thMay, 20X1: Loan interest relating to the project starts to be incurred
(ii)2ndJune, 20X1 : Technical site planning commences
iii)19thJune, 20X1 : Expenditure on the project started to be incurred
(iv)18thJuly, 20X1 : Construction work commences
Identify commencement date


  1. 25thJune, 20X1
  2. 29thJune, 20X1
  3. 19thJune, 20X1
  4. 30thJune, 20X1

Answer: 3


Q:3 ABC Ltd. has taken a loan of USD 20,000 on 1stApril, 20X1 for constructing a plant at an interest rate of 5% per annum payable on annual basis.
On 1stApril, 20X1, the exchange rate between the currencies i.e. USD vs Rupees was`45 per USD. The exchange rate on the reporting date i.e. 31stMarch, 20X2 is`48 per USD.
The corresponding amount could have been borrowed by ABC Ltd from State bank of India in local currency at an interest rate of 11% per annum as on 1stApril, 20X1.
Increase in liability due to change in exchange difference?


  1. 50000
  2. 45000
  3. 65000
  4. 60000

Answer: 4


Q:4 On 1 January Year 1, Entity Q purchased a machine costing`2,40,000 with an estimated useful life of 20 years and an estimated zero residual value. Depreciation is computed on straight-line basis.The asset had been re-valued on 1 January Year 3 to`2,50,000, but with no change in useful life at that date. On 1 January Year 4 an impairment review showed the machine’s recoverable amount to be`1,00,000 and its estimated remaining useful life to be 10 years.


The carrying amount of the machine at the end of Year 2


  1. 200000
  2. 216000
  3. 235000
  4. 266000

Answer: 2


Q:5 Venus Ltd. has an asset, which is carried in the Balance Sheet on 31stMarch, 20X1 at`500 lakh. As at that date the value in use is`400 lakh and the fair value less costs to sells is`375 lakh.

From the above data calculate impairment loss.


  1. 20 lakh
  2. 120 lakh
  3. 100 lakh
  4. None of these

Answer: 3


Q:6 Jupiter Ltd, a leading manufacturer of steel is having a furnace, which is carried in the balance sheet on 31stMarch, 20X1 at`250 lakh. As at that date the value in use and fair value is`200 lakh. The cost of disposal is`13 lakh.
Calculate the Impairment Loss to be recognised in the books of the Company?


  1. 100 lakh
  2. 150 lakh
  3. 50 lakh
  4. None of these

Answer: 3


CA Final - Paper 1 - FR - Chapter 5   


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