Question

1 point A trader purchased machinery for Rs.10,000 in Jan 2004. Depreciation is charged @ 25% diminishing balance. At the end of third year it was sold for Rs. 1,000. Profit or Loss on sale of machine will be: *​

Answer 1

Answer:

Correct option is

D

Loss Rs.. 3219

Profit/loss on sale of asset = sale value - WDV of the asset

                                            = 1,000 - 4,219

                                            = Loss of 3,219

                   

Working notes:-  

Depreciation for 1st year :-

= cost of the machine x rate of machinery

= 10,000 x 25/100

= RS- 2,500

Depreciation for 2nd year :-

= (10,000 - 2,500) 7,500 x 25/100

= RS-1,875.

Depreciation for the 3rd year :-

= (7,500 - 1,875) 5,625 x 25/100

= RS-1,406.

WDV of asset at the end of the 3rd year :-

= 10,000 - (2,500 + 1,875 + 1,406)  

= RS-4,219.

Step-by-step explanation: