Question

A machine worth rs.1,80,000 depreciates at the rate of 18% of the value of the machine per annum. the value of the machine in 18 months from now will be

Answer 1

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Answer 2

GIVEN: Machines cost = Rs 1,80,000 ; Rate of depreciation = 18%

TO FIND: Value of machinery after 18 months

SOLUTION:

• Depreciation is the normal wear and tear in the value of fixed assets.

• Depreciation is charged by two methods Original Cost Method and the written down value method.
• Original Cost Method is a method in which depreciation is charged on machinery at its original cost every year.
• Written Down Value Method is a method in which a machine is depreciated every year on its book value.

In a year there are 12 months so 18 months means one year and six months.

Note- Machinery is depreciated by following the written down value method.

Depreciation for 12 month

Depreciation = 1,80,000 × $\frac{18}{100}$

                     = 32,400

Value of machinery after depreciation = 1,80,000 - 32,400

                                                                = 1,47,600

Depreciation for 6 months

Depreciation = 1,47,600 × $\frac{18}{100}$ × $\frac{6}{12}$

                   = 13,284

Value of machinery after depreciation = 1,47,600 - 13,284

                                                               = 1,34,316

The value of the machine 18 months from now will be 1,34,316.