Question

On 1st January 2011 Bharat Ltd. Purchased a machine for Rs. 10,000 and written back depreciation @ 10% p.a. At the end of the year 2014, the company decided to change the method of depreciation from Straight Line Method to Written Down Value Method respectively, the rate of depreciation remaining the same.
On account of changed method of depreciation-

• A. Short Depreciation to be written back Rs. 580
• B. Excess Depreciation to be written back Rs. 580
• C. Excess Depreciation to be written back Rs. 290
• D. Short Depreciation to be written back Rs. 1160

Answer 1

Answer: (B)

Excess Depreciation to be written back Rs. 580

Difference in WDV and SLM =

Working notes:-

1) depreciation as per SLM method:- (2011-2014)

= 10,000 x 10/100 x 4 years

= RS-4,000.

2) depreciation as per WDV method

Depreciation for 1st year :-

= 10,000 x '10/100

= RS-1,000.

Depreciation for 2nd year :-

= (10,000 - 1,000) 9,000 x 10/100

= RS-900

Depreciation for 3rd year:-

= (9,000 - 900) 8,100 x 10/100

= RS-810

Depreciation for 4th year ;-

= (8,100 - 810) 7,290 x 10/100

= RS-729.