Aar Vee Ltd. Bought a machine for Rs 60,00,000. The management estimates a useful life of 5 years for the machine after which it can be sold for Rs. 3,00,000. For accounting purposes, the company charges depreciation on SLM basis. Whereas for tax purposes, the machine is eligible for depreciation at 45.07% on WDV basis. (1) Prepare depreciation schedule for SLM. (ii) Prepare depreciation schedule for WDV. (111)What would be the impact of WDV method of depreciation (as compared to SLM) on profits and tax liability of the firm till year 2?
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Under straight line method of depreciation, depreciation expense is calculated as below:
Depreciation = (Cost of Asset - Scrap value)/ Estimated useful life
Depreciation = (Rs. 252000 - Rs. 12000) / 6 years
Depreciation = Rs. 240000 / 6 years
Depreciation = Rs. 4000
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