Question

Y Ltd. purchased a machine on 1.1.2012 for Rs 12,000. Installation expenses were Rs 1,000. Residual value after 5 years Rs 500. Depreciation is provided under WDV. Depreciation rate is 20%. Depreciation for 3rd year = ?

• A. $1,664$
• B. $1,536$
• C. $1,600$
• D. None of the above

Answer 1

Answer: (A)

$1,664$

Depreciation for 3rd year :-

= 8,320 x 20/100

= 1,664.

Working notes :-

1) Value of machinery :- 12,000 + 1,000

= 13,000

1st year depreciation :-

= 13,000 x 20/100

= 2,600

2nd year depreciation :-

= (13,000 - 2,600) 10,400 x 20/100

= 2,080

2) WDV of machinery at the beginning of 3rd year =

= 13,000 - 2,600 - 2080

= 8320.