On 1st April, 2012 in Sethi's Ledger, furniture account showed a balance of Rs. 2,00,000. On 1st October, 2012 Sethi purchased new furniture by paying Rs. 5,000 and giving old furniture whose book value on 1st April, 2012 was Rs. 12,000 to the seller. Sethi provides depreciation on furniture @ 10% per annum on diminishing balance method. The net value of furniture in Sethi's books as on 31st March, 2013 would be:

Rs. 1,85,080

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Rs. 1,83,960

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Rs. 1,84,780

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Rs. 2,04,400

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Solution

The correct option is D Rs. 1,84,780
Cost of new asset purchased
Cash paid $= 5, 000$
Old asset given up $= 11, 400$
(12,000-600) $= 16, 400$
Depreciation
(i) $(2, 00, 000 - 12, 000) \times$ 10% = 18,800
(ii) 16,400 x 10% x 6/12 = 820
(iii) $18800 + 820$ = 19,620
Balance as per furniture A/c - 2,00,000
Cost of new asset purchased -5,000
Less: depreciation $=$ 19,620
Less: depreciation $=$ 600
12000 x 10% x 6/12
Net value of furniture $=$ 184780

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