Question

On 1 April 2012, X Ltd. purchased a machinery for Rs. 12,00,000. On 1 Oct. 2014, a part of the machinery purchased on 1 April 2012 for Rs. 80,000 was sold for Rs. 45,000 and a new machinery at a cost of Rs. 80,000 was purchased and installed on the same date. The company has adopted the method of providing 10% p.a. depreciation on the written down value basis. The closing balance of 'Provision for Depreciation Accounts' as at 31.03.2015 will be:

• A. Rs. 1,20,000
• B. Rs. 2,28,000
• C. Rs. 3,07,520
• D. Rs. 3,48,000

Answer 1

The correct option is C Rs. 3,07,520

Balance in 'Provision for depreciation Account" as on 31.03.2015:-

= depreciation on unsold machinery + Depreciation on new machinery

= RS- 3,03,520 + RS-4,00

RS-3,07,520.

Working notes:-

1) Depreciation on unsold machinery from 1.4.2012 to 31.03.2015:-

= 1,12,000 + 1,00,800 + 90,720

= RS-3,03,520.

Depreciation for 12-13:-

= (12,00,000 - 80,000) 11,20,000 x 10/100

= RS-1,12,000

Depreciation for 13-14:-

= (11,20,000 - 1,12,000) 10,08,000 x 10/100

= RS-1,00,800

Depreciation for 14-15:-

= (10,08,000 - 1,00,800) 9,07,200 x 10/100

= RS-90,720.

2) Depreciation on new machinery from 1.10.2014 to 31.03.2015 (6months)

= 80,000 x 10/100 x 6/12

= RS-4,000.