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Question

A company bought machinery for Rs. 50,000 and the salvage value at the end of 5 years is Rs. 5,000. The company charges depreciation using SLM method. Which of the following is correct?


  1. Depreciation Account Debit 9,000

  2. Machinery Account Debit 10,000

  3. Depreciation Account credit 10,000

  4. Machinery Account Debit 9,000


Solution

The correct option is A

Depreciation Account Debit 9,000


Particulars Amount (Rs.)   
Cost of Asset 50,000  
Less: Salvage value      5,000  
Depreciable value 45,000  
Depreciation   9,000         (45,000/5)

The correct entry would be

Depreciation A/c   Dr.   9,000
 To Machinery A/c              9,000

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