A machine costing Rs. 55,000 has an expected useful life of 10 years. Depreciation is calculated on the diminishing balance method at the rate of 25%. At the end of year 5 the machine was actually disposed of for Rs. 15,000. (Depreciation is charged in all years 1 - 5). The resulting gain or loss is ...........

Gain of Rs. 1,948

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Gain of Rs. 1,500

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Loss of Rs. 1,500

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Loss of Rs. 1,948

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Solution

The correct option is A
Gain of Rs. 1,948

Year Value Depreciation WDV

1 55,000 13,750 41,250

2 41,250 10,312 30,938

3 30,938 7,734 23,204

4 23,204 5,801 17,403

5 17,403 4,351 13,052

Gain
= Rs. 15,000 - Rs. 13,052 = Rs. 1,948

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Year	Value	Depreciation	WDV
1	55,000	13,750	41,250
2	41,250	10,312	30,938
3	30,938	7,734	23,204
4	23,204	5,801	17,403
5	17,403	4,351	13,052

The correct option is A Gain of Rs. 1,948 Year Value Depreciation WDV 1 55,000 13,750 41,250 2 41,250 10,312 30,938 3 30,938 7,734 23,204 4 23,204 5,801 17,403 5 17,403 4,351 13,052 Gain = Rs. 15,000 - Rs. 13,052 = Rs. 1,948

The correct option is A
Gain of Rs. 1,948

Year Value Depreciation WDV

1 55,000 13,750 41,250

2 41,250 10,312 30,938

3 30,938 7,734 23,204

4 23,204 5,801 17,403

5 17,403 4,351 13,052

Gain
= Rs. 15,000 - Rs. 13,052 = Rs. 1,948