Question

C.Ltd acquired a machine on $1$st January, $2010$ at a cost of Rs$14,000$ and spent Rs$1,000$ on its installation. The firm writes off depreciation at $10\%$ p.a of the original cost every year. The books are closed on $31st$ December every year. On $31st$ May $2013$ machine sold for Rs$8,000$. Profit/Loss on sale = ?

• A. Profit - Rs$2,275$
• B. Loss - Rs$2,275$
• C. Profit - Rs$1,875$
• D. Loss - Rs$1,875$

Answer 1

The correct option is D Loss - Rs$1,875$

Profit/loss = Sales value - WDV of machinery

= 8,000 - 9,875

= Loss of Rs-1875.

Working notes :-

Depreciation on machinery(SLM method)

= 15,000 x 10%

= 1,500.

WDV on 31st may 2013

= Cost of machinery - depreciation (For 3 years and 5 months)

= 15,000 - (1500 x 3 + 1500 x 5/12)

= 15,000 - 5,125

= Rs-9,875.

1st January 2010 to 31st December 2012 = 3 years

31st December to 31st may 2013 = 5 months.