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Question

Pronto Pack Ltd. sells its old packaging machine for Rs. 300 on 31 December 2005. The machine was bought during the year ended 31 December 2000 for Rs. 10,000. Depreciation on plant and machinery is charged at 20% on a straight-line basis. The effect due to disposal of machine is:


A

Gain of Rs. 200

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B

Gain of Rs. 300

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C

Loss of Rs. 400

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D

Loss of Rs. 300

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Solution

The correct option is B

Gain of Rs. 300


Book Value = Nil, hence gain of Rs. 300.


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