Question

Amit Ltd. purchased a machine on 01.01.2013 for Rs. 1,20,000.
Installation expenses were Rs. 10,000.
Residual value after 5 years is Rs. 5,000.
Rate of depreciation is 10% on WDV basis.
Depreciation for 4th year = _________.

• A. Rs. 12,500
• B. Rs. 11,250
• C. Rs. 10,125
• D. Rs. 9,477

Answer 1

The correct option is D

Rs. 9,477

Value of machinery
= Rs. 1,20,000 + Rs. 10,000
= Rs. 1,30,000.

1st year depreciation
= Rs. 1,30,000 x 10/100
= Rs. 13,000.

2nd year depreciation
= Rs. (1,30,000 - 13,000) x 10/100
= Rs. 1,17,000 x 10/100
= Rs. 11,700.

3rd year depreciation
= Rs. (1,17,000 - 11,700) x 10/100
= Rs. 1,05,300 x 10/100
= Rs. 10,530.


WDV of machinery at the beginning of 4th year =
= Rs. 1,05,300 - Rs. 10,530
= Rs. 94,770.

Depreciation for 4th year
= Rs. 94,770 x 10/100
= Rs. 9,477.