Question

1. Keshav Ltd. purchased a Machinery on 1 July, 2013 for 2,50,000 whose life was expected
to be 10 years. Its estimated scrap value at the end of 10 years was * 10,000. (1) Find
the amount of depreciation to be charged to Profit and Loss Account every year. (ii) Also
calculate the rate on which depreciation is to be charged every year.
(Ans. Amount of Depreciation - 24,000 every year; Rate of Depreciation - 9.6% p.a.)​

Answer 1

Answer:

1> . Amount of depreciation to be charged each year =( price of machinery - its estimated scrap value ) / expected lifespan of machinery.

= (2,50,000 - 10,000) / 10

= 2,40,000/10

= 24,000.

2>. Rate of depreciation =

(amount of depreciation to be charged each year / price of machinery) * 100

= (24,000 / 2,50,000) * 100

= 0.096 * 100

= 9.6%