Question

Machinery costing Rs. 20,00,000 is depreciated on straight line assuming 10 years

working life and nil salvage value for four years. At the end of the fourth year, the

machinery was revalued upwards by Rs. 80,000. The remaining useful life of the

machinery was also reassessed as 8 years at the end of the fourth year. Calculate the

depreciation for 5th Year.​

Answer 1

ANSWER :

• If a Machinery costing Rs. 20,00,000 is depreciated on straight line assuming 10 years working life and nil salvage value for four years and at the end of the fourth year, the machinery was revalued upwards by Rs. 80,000 as well as the remaining useful life of the machinery was also reassessed as 8 years at the end of the fourth year; then the depreciation for the 5th year will be Rs. 1,60,000.

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SOLUTION :

❒ Given :-

• Cost of the Machinery = Rs. 20,00,000

• Useful life of the Machinery assumed = 10 years

• Salvage value of the Machinery = Nil

• Method of charging depreciation = Straight line method

• Value of the Machinery after revaluation upwards at the end of fourth years = Rs. 80,000

• Remaining useful life reassessed at the end of fourth year = 8 years

❒ To Calculate :-

• Depreciation for the fifth year = ?

❒ Calculation :-

Here,

• Cost of the Machinery = Rs. 20,00,000

• Salvage Value of the Machinery = Nil

• Estimated useful life of the Machinery = 10 years

When depreciation is charged under Straight Line Method, then

• $\dag \: \underline{ \boxed{ \rm{Depreciation \: \: charged \: \: per \: \: year = \dfrac{Cost - Salvage \: \: Value }{Estimated \: \: useful \: \: life}}}}$

Substituting the values in the formula, we get,

• ★ Depreciation charged per year = Rs. $\sf{\dfrac{20,00,000 - 0}{10}}$

➜ Depreciation charged per year = Rs. $\sf{ \dfrac{20,00,000}{10}}$

∴ Depreciation charged per year = Rs. 2,00,000

Hence,

• ★ Amount of depreciation for four years = Rs. (2,00,000 × 4)

∴ Amount of depreciation for four years = Rs. 8,00,000

So,

• ★ Written down value of the Machinery at the end of fourth year = Rs. 20,00,000 - Rs. 8,00,000

∴ Wriiten down value of the Machinery at the end of fourth year = Rs. 12,00,000

Now,

• ⥀ At the end of fourth year, Machinery is revalued by upward = Rs. 80,000

∴ Depreciable value after revaluation = Rs. 12,00,000 + Rs. 80,000

➜ Depreciable value after revaluation = Rs. 12,80,000

Again,

• ⥀ Remaining useful life reassessed at the end of fourth year = 8 years

∴ Depreciation for the fifth year = Rs. $\sf{ \dfrac{12,80,000}{8}}$

➜ Depreciation for the fifth year = Rs. 1,60,000

• Hence, Amount of depreciation of the Machinery for the fifth year is Rs. 1,60,000.

Answer 2

Answer:

solution.

1)machinery costing for ₹2000000/- with 10years working useful life

2)till 4 years no salvage has been arise.

depreciation for 4years= 2000000/10*4

->₹800000/-

remaining useful life i.e after 4years is ->6years with the value of ₹1200000

3)but at the end of 4th year the machinery upwards by ₹80000

remaining useful life ->1200000

(+) upwards ->800000._

1280000

after upwards it's useful life is 8 years

Depreciation for 5th year ->1280000/8

=160000

*it contains 2marks in ca foundation*