Question

Sudarshan Ltd. purchased a machinery of Rs.1,00,000 and spent Rs. 10,000 on its installation. The estimated useful life of the asset is 10 years. Calculate depreciation for the year ending 31st March, 2016 in each of the following instances.
(i) Depreciation is to be charged @ 10 % per annum and the machinery was purchased on 1st April, 2015.
(ii) Depreciation is to be charged @ 10 % per annum and the machinery was purchased on 1st October, 2015.
(iii) Depreciation is to be charged @ 10 % and the machinery was purchased on 1st January, 2016.

Answer 1

(i) Depreciation =1,1000 $\times \frac{10}{100}$ =Rs.11,000
Note: Depreciation has been charged for full year.
(ii) Depreciation =1,10,000 $\times \frac{10}{100}$ $\times \frac{6}{12}$= Rs. 5500
Note: Depreciation has been charged for a 6-month period.
(iii) Depreciation =1,10,000 $\times \frac{10}{100}$ = Rs. 11,000

Note: Time period will not be considered, as depreciation is not defined with reference to a year.