Solutions for accountancy book of C Mohan Juneja, J.S Arora and R.C <br /> chapter 13 Depreciation
sum 10
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Answer:
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Answer:
Problem 10 in Chapter 13 of the Accountancy book by C Mohan Juneja, J.S Arora, and R.C requires the calculation of the depreciation charge for a piece of machinery using the straight-line method.The depreciation charge for each year is then calculated and found to be: Year 1 to Year 4: Rs. 8,000;Year 5: Rs. 8,000, Rs. 5,714.29 (after overhaul) and Year 6 and Year 7: Rs. 5,714.29
Explanation:
The depreciable value of the machinery is calculated as follows:
Depreciable value = Purchase cost - Residual value
= Rs. 50,000 - Rs. 10,000
= Rs. 40,000
Using the straight-line method, the annual depreciation charge is calculated as follows:
Annual depreciation charge = Depreciable value / Life
= Rs. 40,000 / 5
= Rs. 8,000
The depreciation charge for each year is as follows:
Year 1: Rs. 8,000
Year 2: Rs. 8,000
Year 3: Rs. 8,000
Year 4: Rs. 8,000
Year 5: Rs. 8,000
Since the machinery was overhauled in the fourth year, the useful life of the machinery is extended by 2 years. Therefore, the revised useful life of the machinery is 7 years (5 original years + 2 extended years). The revised annual depreciation charge for the remaining useful life of the machinery is calculated as follows:
Revised annual depreciation charge = Depreciable value / Revised life
= Rs. 40,000 / 7
= Rs. 5,714.29
The depreciation charge for each year after the overhaul is as follows:
Year 5: Rs. 8,000
Year 6: Rs. 5,714.29
Year 7: Rs. 5,714.29
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