Question

sree Ltd. purchased a new machinery for 800000.it has an estimated useful life of 10 years. its residual value is estimated at 50000.compute the amount of depreciation on new machinery​

Answer 1

ANSWER :

• ❖ If Shree Ltd. purchased a new machinery for Rs. 8,00,000 and it has an estimated useful life of 10 years; also its residual value is estimated at Rs. 50000; then the amount of depreciation on new machinery is Rs. 75,000.

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SOLUTION :

❒ Given :-

• Cost of the new machinery = Rs. 8,00,000

• Estimated useful life of the new machinery = 10 years

• Residual value of the new machinery = Rs. 50,000

❒ To Calculate :-

• Amount of depreciation on the new machinery = ?

❒ Calculation :-

Since the rate of depreciation has not been stated, the amount of depreciation has been calculated by the following formula :

• $\dag \: \: \underline{ \boxed{ \bold{Depreciation = \dfrac{ \: Cost \: \: of \: \: the \: \: Asset - Residual \: \: Value \: }{ \: \: Expected \: \: Life \: \: of \: \: the \: \: Asset}}}}$

Here,

• Cost of the machinery = Rs. 8,00,000

• Residual Value = Rs. 50,000

• Expected life of the machinery = 10 years

Using the formula, we get,

• $\bigstar \: \: \sf{Depreciation = \dfrac{ \: Cost \: \: of \: \: the \: \: Asset - Residual \: \: Value \: }{ \: \: Expected \: \: Life \: \: of \: \: the \: \: Asset}}$

➨ Depreciation = $\sf{\dfrac{Rs. \: 8,00,000 - Rs. \: 50,000}{10}}$

➨ Depreciation = $\sf{\dfrac{Rs. \: 7,50,000}{10}}$

∴ Depreciation = Rs. 75,000

• Hence, the amount of depreciation on the new machinery per year is Rs. 75,000.