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 @ 10% p.a. under written down value method. Depreciation for 4th year will be:

• A. Rs. 50,000
• B. Rs. 26,000
• C. Rs. 21,060
• D. Rs. 18,954

Answer 1

Answer: (D)

Rs. 18,954

Depreciation for 4th year :-

= WDV x rate of depreciation

= 1,89,540 x 10/100

= RS-18,954.

Working note:-

Depreciation for the 1st year :-

= Depreciable value x rate

= 2,40,000 + 20,000 x 10/100

= RS-26,000.

Depreciation for the 2nd year :-

= (2,60,000 - 26,000) 2,34,000 x 10/100

= RS-23,400.

Depreciation for the 3rd year :-

= (2,34,000 - 23,400) 2,10,600 x 10/100

= RS-21,060

WDV at the end of 4th year:-

= 2,60,000 - 26,000 - 23,400 - 21,060

= 1,89,540.