Q 1 A company acquired a machine on 1.4.2006 for ` 5,00,000. The company charged depreciation upto 2008-09 on straight line basis with estimated working life of 10 years and scrap value of ` 50,000. From 2009 -10, the company decided to change depreciation method at 20% on reducing balance method. Compute the amount of depreciation to be debited to Profits and Loss A/c for the year 2009 - 10.
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Annual Depreciation on straight line method
= (500000 - 50000)/10 = 45000
2006-07, 2007-08, 2008-09 i.e., 3 years of Depreciation = 45000 *3 = 135000
W.D.V of machine in the beginning of 2009-10
= 500000 - 135000
= 365000
Depreciation on Machine = 20% of 365000
= 73000
Hence the amount of Depreciation to be debited to P&L A/C for the year 2009-10 = Rs 73000
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