A large nationalized bank upgrades its regional headquarters by replacing old manual security gates (remaining book value 2,00,000, sold as scrap for 50,000) with automated biometric scanners costing 50,00,000. The installation required structural wall modifications costing an additional 5,00,000. What is the correct accounting treatment for these transactions?

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Accounting · Capital and Revenue Expenditure

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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Correct answer

Capitalize 55,00,000 as the cost of the new system, and record a loss of 1,50,000 on the disposal of the old gates in the Profit and Loss account.

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Answer 1

Capitalize 55,00,000 as the cost of the new system, and record a loss of 1,50,000 on the disposal of the old gates in the Profit and Loss account.

Answer 2

Capitalize 50,00,000 for the scanners and treat the 5,00,000 wall modification as a revenue repair expense.

Answer 3

Capitalize the entire 55,00,000 and add the remaining 2,00,000 book value of the old gates to the new asset's cost to avoid showing a loss.

Answer 4

Expense the entire 55,00,000 immediately as it relates to security infrastructure.

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