Question

The value of machinery as on April 1, 2018 is Rs. 64,000 This machine was purchased on April 1st 2016 for Rs.1,00,000. It was sold on October 1, 2018 and depreciation charged thereon @ 20% p.a. under Written Down Value Method. The total Depreciation Provided on the Machinery Sold is​

Answer 1

Given:

Cost price of machine = Rs. 100000

Value of Machine as on April 1, 2018 = Rs. 64000

Rate of depreciation = 20% p.a.

To find:

The total depreciation provided when the machine is sold.

Solution:

Cost Price = 100000

Rate of depreciation = 20%

Buying date = April 1, 2016

Selling Date = October 1, 2018

Depreciation for the 1st year (April 1,2016 - March 31, 2017)

$= \frac{20}{100} \times 100000$

= Rs. 20000

New Value of machinery = 100000 - 20000

= Rs. 80000

Depreciation for the 2nd year ( April 1, 2017 - March 31, 2018 )

$= \frac{20}{100} \times 80000$

= 16000

New Value of machinery = 80000 - 16000

= Rs. 64000

Depreciation for the remaining 6 months ( April 1, 2018 - October 1, 2018)

$= \frac{20}{100} \times \frac{6}{12} \times 64000$

= Rs. 6400

Selling Price = 64000 - 6400

= Rs. 57600

Total Depreciation

= 20000 + 16000 + 6400

= Rs. 42400

Therefore the total depreciation provided when the machine is sold is Rs. 42400