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Standard XII
Accountancy
Return on Investment
A machine was...
Question

A machine was bought at a cost of Rs. 5 lacs on 1.1.02 During its life of 10 years it will be depreciated on SLM basis. On 31.12.08 the machine was sold for Rs. 50,000. Find out the profit/loss?

A
Loss of Rs. 1,50,000
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B
Loss of Rs. 100000
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C
Profit of Rs.1,00,000
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D
Profit of Rs. 1,50,000
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Solution

The correct option is B Loss of Rs. 100000
Profit/loss on Asset = Sale value of asset - WDV of asset
= 50000 - 1,50,000
= Loss of RS-1,00,000

Working notes:-
WDV of the asset as on 31.12.08
= Cost - depreciation for 7 years on SLM basis
= 5,00,000 - 3,50,000 ( 50,000 x 7years)
= RS-1,50,000
Depreciation on SLM basis = depreciable amount
------------------------------
useful life
= 5,00,000
-------------------
10
= RS-50,000.

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