Question

Date of Purchase of Machine 1.4.2012, cost: Rs. 12,00,000, Rate of Depreciation: 10% p.a Written down Value Basis. On 1.10.2014, a part of machinery purchased on 1.4.2012. for Rs. 80,000 was sold for Rs. 45,000. The closing balance of Provision for Depreciation Accounts as at 31.3.2015 will be:

• A. Rs. 1,20,000
• B. Rs. 2,28,000
• C. Rs. 3,03,520
• D. Rs. 3,44,000

Answer 1

Answer: (C)

Rs. 3,03,520

Balance in provision for depreciation account:-

= Depreciation on Existing machinery (12,00,000 - 80,000)

= 1,12,000 + 1,00,800 + 90720.

= RS-3,03,520.

Working notes:-

1) Accumulated depreciation on old machinery from 1.4.2014 to 31.03.2015

(WDV basis)

Depreciation for 1st year:-

= 11,20,000 x 10/100

= RS-1,12,000.

Depreciation for 2nd year:-

= (11,20,000 - 1,12,000) 10,08,000 x 10/100
= RS-1,00,800.

Depreciation for the 3rd year :-

=(10,08,000 - 1,00,800) 9,07,200 X 10/100

= RS-90,720.