Question

In the beginning of the financial year CAS Ltd. purchased a new machine and made the following payments In relation to it:
Rs. Rs.
Cost as per supplier's list 10,40,000 -
Less: Agreed discount 1,00,000 9,40,000
Delivery charges 20,000
Erection charges 40,000
Annual maintenance charges 60,000
Additional Components to increase capacity of the machine 80,000
Annual insurance premium 10,000
If depreciation is provided @ 10 % p.a. WDV, depreciation for 3rd year is

• A. Rs. 87,480
• B. Rs. 88,290
• C. Rs. 76,140
• D. Rs. 89,100

Answer 1

The correct option is A Rs. 87,480

Depreciation for 3rd year :-

= 8,74,800 x 10/100

= RS-87,480

Working notes:-

1) Depreciable value of asset:-

Cost of the asset = 10,40,000

Add:- delivery charges = 20,000

erection charges = 40,000

Additional components to increase capacity = 80,000

Less:- Agreed discount = (1,00,000)

-------------------

Cost of the asset 10,80,000

2) Depreciation for the 1st year :-

= 10,80,000 x 10/100

= RS-1,08,000

3) Depreciation for 2nd year :-

= (10,80,000 - 1,08,000) 9,72,000 x 10/100

= 97,200

4) WDV at the end of 2nd year

= 10,80,000 - 1,08,000 - 97,200

= RS-8,74,800.