Question

The balance of Machinery on March 31, 2021 was Rs.3,20,000. The machinery was purchased on April 1,2019. Depreciation was to be charged @ $10 \%$ p.a. by Straight Line Method. The cost price of the Machine as on April 1, 2019 was
(a) Rs. 4,00,000
(b) Rs. 3,84,000
(c) Rs. 2,56,000
(d) Rs. 2,40,000

Answer 1

Given:

Value of machinery on 31st March 2021 = Rs. 320000

Date of purchase of the machinery = 1st April 2019

depreciation % = 10%

To find:

the original cost of the machinery

Solution:

Value on 31st March 2021 = Rs. 320,000

let the original value be 'x'

depreciation % = 10%

Method for charging depreciation = Straight Line Method.

Let us find the depreciation amount for 2 years.

April 1, 2019, to 31st March 2021

$depreciation = \frac{10}{100} \times x \: \times 2$

$depreciation \: = \frac{2x}{10}$

Now,

$320000 + \frac{2x}{10} = x$

$320000 = x - \frac{2x}{10}$

$320000 = \frac{10x - 2x}{10}$

$320000 = \frac{8x}{10}$

$320000 \times 10 = 8x$

$\frac{320000 \times 10}{8} = x$

$400000 = x$

Therefore, the original value of the machinery on April 1, 2019, is Rs. 400000.

A correct option is an option (a)