A company purchases a machinery by exchanging a old machinery already in use. New machine market cost Rs.1 lakh. Old machine net book value after depreciation is rs.8000. Vendor agreed to take the old machine at rs.5000. So new machine price was settled at Rs.95000 (One lakh market value of new machine minus Rs.5000 for old machine). At what amount the company will show the new machine in its books? Rs.95000 or Rs.1 lakh? Kindly clarify with regard to AS and IT provisions.
Regards.
Ca Sanjay Baheti
CAclubindia
