Question

In the books of D Ltd. machinery account shows a debit balance of Rs. $60,000$ as on April 1, 2003. The machinery was sold on September 30,2004, for Rs. $20,000$. The company charges depreciation @$20$%p.a on diminishing balance method. Profit/Loss on sale will be __________.

• A. $Rs.23,200$ Profit
• B. $Rs.23,200$ loss
• C. $Rs.7,800$ profit
• D. $Rs.7,800$ loss

Answer 1

The correct option is B $Rs.23,200$ loss

Calculation of Profit and loss on sale of machinery in the books of D Ltd.

Book value of machinery as on April 1, 2003 Rs. 60000

Less : Depreciation @20 % p.a Rs.(12000)

(April 1, 2003 - March 31,2004)

Written down value of machinery on April 1, 2004 Rs. 48000

Less: Depreciation @20 % p.a for 6 months Rs. (4800)

(April 1, 2004 - sept. 30, 20004)

Written down value of machinery on Sept. 30, 2004 Rs. 43200

Less : Sales value of machinery Rs. (20000)

(Profit)/ Loss on sale of machinery Rs. 23200