Question

Ambuja Cement Ltd. purchased a machine on 1-1-2009 for 1,20,000.
Installation expenses were 10,000. Its residual value after 10 year is 5,000.
On 1-03-2009 expenses on its repairs were incurred to the extent of 2,000.
Depreciation is provided under straight line method. Books are closed on 31st
March every year. The amount of depreciation for the current year will be :
(a) * 3,125
(6) * 3,175
c 12.500
(d) 12,700​

Answer 1

Answer:

3125

Explanation:

only for 3 months 3/12 * 12500

Answer 2

Given:

Cost of depreciation = 1,20,000

In-stallation Expenses = 10,000

Residual Value after 10 years is 5,000

To find:

Amount of depreciation for the current year.

Solution:

Cost price = 1,20,000

In-stallation Expenses 10,000

Total cost price = 130,000

Expenses incurred while repairs would be reflected in the profit and loss account and not the depreciation account.

Residual Value = 5000.

Time = 10years.

let the depreciation amount be 'x'

since the depreciation is changed using the straight-line Method the depreciation amount remains constant throughout the life of the machinery.

$total \: cost \: = (depreciation \: \times time \: ) + residual \: value$

$130000 = (x \times 10) + 5000$

$130000 - 5000 = 10x$

$125000 = 10x$

$x = \frac{125000}{10}$

$x = 12500$

$depriciation \: = 12500$

Since the machinery was bought in 1.1.2009 and books are closed on March 31st the value of depreciation is only calculated for 3 months

so,

$depreciation \: for \: the \: year = 12500 \times \frac{3}{12}$

$depreciation \: for \: the \: year = 3125$

Therefore the depreciation amount for the current year is 3125.

Option (a) is the correct answer.