Question

Q. 4. A company purchased on 1st July, 2010, machinery costing <30,000. It
purchased further machinery on 1st January, 2011, costing $20,000 and on Ist
October 2011 costing *10,000.On 1st April, 2012, the machinery installed on 1st
July 2010, became obsolete and was sold for 3,000.​

Answer 1

So here depreciation is to be provided at 10% on Fixed Base Installment Method, i.e we need to calculate 10% on the purchase value and provide same depreciation every year, for 3 years. So depreciation will be as follow:

1/7/2010-->Machine1-->

First year--> RS. 2250[(30000*10%)=3000](3000*9/12)

RS. 3000(30000*10/100)

1/1/2011-->Machine2-->

RS. 2000(20000*10/100)

1/10/2011-->Machine3-->

RS. 300(10000*10/10)

Now provide this depreciation for next 3 years from the date of purchase. This will be done as follow:

Machine 1 --> Till date 31/3/2012(as we are going to sell the machinery on the 1st. Date of next financial year.

Machine 2 --> Till date 1/1/2014

Machine 3 --> Till date 1/10/2014

The machine 1 gets absolute on 1/4/12 and it is sold at RS. 3000. So depreciation is only to be provided for 2 years. So on 1/4/12 the book value of machinery will be rs. 24,750[2250+3000]. Therefore there is a loss on sale of machinery of RS. 21,750(24750-3000).