Question

On the basis of the information given below answer the following question.
In the year 2014-15 C Ltd. purchased a new machine and made the following payments in relation to it:-

Particulars	Rs
Cost as per supplier's list Agreed discount Delivery charged Erection charges Annual maintenance charges Additional maintenance charges Additional component to increase capacity of machine Annual insurance premium	5,20,000 50,000 10,000 20,000 30,000 40,000 5,000

If depreciation is provided @ 10 % p.a, SLM depreciation for 3rd year will be:-

• A. Rs$54,000$
• B. Rs$54,5000$
• C. $47,000$
• D. $55,000$

Answer 1

The correct option is A Rs$54,000$

Calculation of cost of the machinery:-

Cost as per supplier = 5,20,000

Add:- delivery charges = 10,000

erection charges = 20,000

Additional component to increase capacity of machine = 40,000

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= 5,90,000

Less:- Agreed discount = (50,000)

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Cost of the machinery :- = 5,40,000

Depreciation on machinery (SLM Basis) = Cost of machinery x rate

= 5,40,000 x 10/100

= 54,000.

Note:- All the cost that are incurred to bring the machinery in the running condition when purchased will be added to the cost of the machinery. Costs like annual maintenance charges, insurance charges, additional maintenance charges etc will not be included in the cost of the machinery.