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Difference between SLM & WDV

Lease hold pr...

Question

Lease hold property is generally depreciated under ____________.

A

annuity method

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B

reducing balance method

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C

double declining method

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D

straight line method

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Solution

The correct option is A annuity method
By leasehold it means the property is taken on lease for a certain number of years. The most general duration is 99 years, but may be less or much more. The lump sum is paid in advance at the time of taking the lease. This should be regarded by the lessee as the capitalized value of an annuity during the life time of the lease. Depreciation is based on such annuity and is generally a fixed amount every year.

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On the basis of the information given below, answer the following question.
NS.Ltd. purchased a lease- hold property on 1st April 2010 for 5 years at a cost of Rs 7,50,000. It is decided to write off the lease by annuity method presuming the rate of interest at 14%.The annuity table shows that annual amount necessary to write - off Rs 1 in 5 years at 14% is Rs 0.291284. Calculations to be made to the nearest rupee.

Depreciation to be provided for each year = ?

Q. Under which of the following method depreciation charged does not declines?
(i) Insurance policy method
(ii) Double decline method
(iii) Annuity method

(iv) Depletion unit method
(v) Depreciation fund method
The correct answer is -

On the basis of the information given below, answer the following question.
NS.Ltd. purchased a lease- hold property on 1st April 2010 for 5 years at a cost of Rs 7,50,000. It is decided to write off the lease by annuity method presuming the rate of interest at 4 %.The annuity table shows that annual amount necessary to write - off Rs 1 in 5 years at 14 % is Rs 0.291284. Calculations to be made to the nearest rupee.

Interest for the year ended 31st March 2011 = ?

Q. Which method of depreciation would you suggest for depreciating a

5

Q. Under Annuity method Asset A/c is debited by ________________.

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