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Question

M/s Sam & Co. purchased Machinery on 1.10.2015 for Rs.1,00,000 and paid for installation Rs.20,000
Depreciation under Straight Line Method 10%.
Ascertain the Accumulated Depreciation balance as on 31.03.2018 ?

A
Rs.50,000
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B
Rs.40,000
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C
Rs.55,000
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D
Rs.30,000
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Solution

The correct option is A Rs.30,000
When the depreciation is charged by creating accumulated depreciation account, following journal entry is passed:

Depreciation A/c Dr.
To Accumulated Depreciation A/c

In the given situation, Machinery purchased on 1st Oct 2015 for Rs.100000 and installation paid Rs.20000. Depreciation is charged under straight line method @10%. Depreciation account will be debited every year by and credited to accumulated depreciation a/c .

For F.Y. 2015-16 for 6 months @10% on Rs.120000 : Rs.6000
For F.Y. 2016-17 @10% on Rs.120000: Rs. 12000
For F.Y. 2017-18 @10% on Rs.120000 Rs. 12000
----------------
Total in accumulated depreciation a/c Rs.30000

Balance in accumulated depreciation account as on 31st March 2018 will be Rs.30000.

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