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, WDV depreciation for 3rd year will be:-

• A. Rs$43,740$
• B. Rs$44,145$
• C. Rs$38,070$
• D. Rs$44,550$

Answer 1

The correct option is A Rs$43,740$

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

-------------------

= 5,90,000

Less:- Agreed discount = (50,000)

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Cost of the machinery = 5,40,000

WDV of machinery at the end of 2nd year (2016-17)

= 5,40,000 - 54,000 - 48,600 (Working notes)

= 4,37,400.

Depreciation for the 3rd year :-

= (4,86,000 - 48,600) 4,37,400 x 10/100

= 43,740.

Working notes. :-

Depreciation for the 1st year :-

= 5,40,000 x 10/100

= 54,000.

Depreciation for the 2nd year :-

= (5,40,000 - 54,000) 4,86,000 x 10/100

= 48,600.