A machine was purchased on 1st April 2007 for Rs 5,00,000 and 1st October 2007 for Rs 2,00,000. Calculate depreciation @ 20% p.a. on written down value method for the year ending 31st March 2008.

Rs. 1,00,000

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Rs. 1,40,000

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Rs. 40,000

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Rs. 1,20,000

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Solution

The correct option is D Rs. 1,20,000
Depreciation for the year 31st march 2008:-
= Existing machinery + new machinery
= 1,00,000 + 20,000
= RS-1,20,000.

Working note:-
Existing machinery = Depreciable amount x rate of depreciation
= 5,00,000 x 20/100
= 1,00,000
New machinery = depreciable amount x Rate of depreciation x No. of months
= 2,00,000 x 20/100 x 6/12 (October to march)
= RS-20,000.

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