Question

T.Ltd. acquired a machine on $1$st January, $2010$ at a cost of Rs$1,40,000$ and spent Rs$10,000$ on its installation. The firm writes off depreciation at $15\%$ p.a on WDV. The books are closed on $31st$ December every year. After $3$ years machine sold for Rs$87,000$. Profit/Loss on sale=?

• A. Profit - Rs$1,023$
• B. Loss - Rs$1,023$
• C. Profit - Rs$5,119$
• D. Loss - Rs$5,119$

Answer 1

The correct option is D Loss - Rs$5,119$

Profit or loss = Sale price of machinery - WDV of machinery

= Rs-87,000 - Rs-92,119

= Loss of Rs-5,119.

Working notes :-

Calculation of WDV at the end of the 3rd year.

= 1,50,000 - 22,500 - 19,125 - 16,256.25

= 92,119.

depreciation for 1st year :-

= 1,40,000 + 10,000 x 15/100

= 22,500.

Depreciation for 2nd year :-

= (1,50,000 - 22,500) x 15/100

= 19,125.

Depreciation for 3rd year :-

= (1,27,500 - 19,125) x 15/100

= 16,256.