Question

X Ltd. Purchased a machine on 1st Jan for Rs. 2,40, 000. Installation expenses were Rs. 20,000. Residual value after 5 years Rs. 10,000. On 1st July expenses for repairs were incurred to the extent of Rs. 4,000. Depreciation is provided under straight line method. Depreciation for 4th year will be:

• A. Rs. 26,000
• B. Rs. 34,000
• C. Rs. 42,000
• D. Rs. 50,000

Answer 1

The correct option is D Rs. 50,000

Depreciation in SLM = cost of assets+Installation charges-scrap value/estimated useful life

= 240000+20000-10000/5

=260000-10000/5

=250000/5

=50000

The amount spent on repairs is a recurring in nature expenses.So,it will not be added to machine.

As it is SLM method so for every year depreciation will be same.