Question

Original cost of an asset is Rs. 2,00,000 and depreciation is charged at written down value. Calculate the amount of depreciation for the next 4 years, if the year ending is 31st December in each of the following conditions
(i) The rate of depreciation is 10 % per annum and the asset was purchased on 1st January.
(ii) The rate of depreciation is 10 % per annum and the asset was purchased on 1st April.
(iii) The rate of depreciation is 10 % and the asset was purchased on 1st October.

Answer 1

(i) $\begin{array}{ccc}\text{Year}& \text{Depreciation Amount}& \text{Book Value WDV}\\ & & \text{(Year end)}\\ \text{Ist Year}& 2,00,000\times \frac{10}{100}=Rs.20,000& 2,00,000-20,000\\ & & =Rs.1,80,000\\ \text{IInd Year}& 1,80,000\times \frac{10}{100}=Rs.18,000& 1,80,000-18,000\\ & & =Rs.1,62,000\\ \text{IIIrd Year}& 1,62,000\times \frac{10}{100}=Rs.16,200& 1,62,000-16,200\\ & & =Rs.1,45,800\\ \text{IVth Year}& 1,45,800\times \frac{10}{100}=Rs.14,580& 1,45,800-14,580\\ & & =Rs.1,31,220\end{array}$

(ii) $\begin{array}{ccc}\text{Year}& \text{Depreciation Amount}& \text{Book Value/WDV}\\ & & \text{(Year end)}\\ \text{Ist Year}& 2,00,000\times \frac{10}{100}\times \frac{9}{12}=Rs.15,000& 2,00,000-15,000\\ & & =Rs.1,85,000\\ \text{IInd Year}& 1,85,000\times \frac{10}{100}=Rs.18,500& 1,85,000-18,500\\ & & =Rs.1,66,500\\ \text{IIIrd Year}& 1,66,500\times \frac{10}{100}=Rs.16,650& 1,66,500-16,650\\ & & =Rs.1,49,850\\ \text{IVth Year}& 1,49,850\times \frac{10}{100}=Rs.14,985& 1,49,850-14,985\\ & & =Rs.1,34,865\end{array}$

(ii) Depreciation will be the same as calculated in (i) because rate of depreciation is not defined with reference to time period.