Question

On the basis of following information answer the following question.

The balance in accumulated depreciation account of a company at the beginning of year $2008-2009$ was Rs$2,00,000$ when the original cost of the assets amounted to Rs$10,00,000$. The company charges $10\%$ depreciation on a SLM basis for all assets including those which have been either purchased or sold during the year. One such asset costing Rs.$5,00,000$ which accumulated depreciation as at the beginning of the year of Rs$80,000$ was disposed off during the year.

The balance of the accumulated depreciation account at the end of the year considering the current year's depreciation charge would be ______________.

• A. Rs.$2,20,000$
• B. Rs.$1,70,000$
• C. Rs.$1,20,000$
• D. Rs.$2,50,000$

Answer 1

The correct option is A Rs.$2,20,000$

The correct option is Option B (1,70,000)

As per question Accumulated depreciation at the beginning of the year was Rs 2,00,000

Calculation of depreciation for the current year is:

Rs 10,00,000 X 10% = 1,00,000

Total accumulated depreciation

= 2,00,000 + 1,00,000

=3,00,000

Also, depreciation for Asset disposed during the year is

5,00,000 X 10% = 50,000

And accumulated depreciation is 50,000 + 80,000 = 1,30,000

Balance of accumulated depreciation account at the end of the year = 3,00,000 - 1,30,000 = 1,70,000.