Question

In the books of SZ Ltd. the machinery account shows a debit balance of Rs. 60,000 as on 1.4.2015. The machinery was sold on 30.9.2016 for 30,000. The company charges depreciation @ 20 % p.a on diminishing balance method. Profit/Loss on sale = ?

• A. Rs$13,200$ Profit
• B. Rs$13,200$ Loss
• C. Rs$6,800$ Profit
• D. Rs$6,800$ Loss

Answer 1

The correct option is B Rs$13,200$ Loss

Depreciation for the year 2015 - 16 = 60,000*20%
= 12000 Rs.
Value of machinery on 1.4.2016 = 48000.
Depreciation from 1.4.2016 to 30.9.2016 = 48000*20% for 6 months
= 4800
Value of machinery on 30.9.2016 = 48000 - 4800
= 43200.
Machinery sold = Rs. 30,000
Loss on sale = 43200 - 30,000
= Rs.13200