Question

N.Ltd. purchase machine for Rs. 4,75,000 on 1.1.2010 and spent Rs 25,000 on its installation. Rate of depreciation 10 % on SLM. Company charge depreciation on SLM up to year ended 31.12.2014. In year 2015 the company wants to change its method of depreciation from SLM to WDV w.e.f. from 1.1.2010. To effect the change in method machinery account will be:-

• A. Credited by Rs$45,245$
• B. Debited by Rs$45,245$
• C. Credited by Rs$42,983$
• D. Debited by Rs$42,983$

Answer 1

Answer: (B)

Debited by Rs$45,245$

Difference = SLM Depreciation - WDV depreciation

= RS-2,50,000 - RS-2,04,755

= RS-45,245 to be debited.

1) Depreciation as per SLM method from 1.1.2010 to 31.12.2014:-

= RS-5,00,000 x 10/100 x 5 years

= RS-50,000 x 5

= RS-2,50,000.

2) Depreciation as per WDV method from 1.1.2010 to 31.12.2014:-

= 50,000 + 45,000 + 40,500 + 36,450 + 32,805

= RS-2,04,755

1st year-

= RS-5,00,000 x 10/100

= RS-50,000.

2nd year:-

= (5,00,000 - 50,000) RS-4,50,000 x 10/100

= RS-45,000.

3rd Year:-

= (4,50,000 - 45,000) 4,05,000 x 10/100

RS-40,500.

4th year:-

= (4,05,000 - 40,500) 3,64,500 x 10/100

= RS-36,450

5th year:-

= (3,64,500 - 36,450) 3,28,050 x 10/100

= RS-32,805