What is the amount of difference between the closing Balance of 2 machines after 2 years , if both the machine were purchased on the same date and with the same amount i.e., Rs.2,00,000.Machine I is depreciated by 10% p. a. under Straight Line Method and Machine II is depreciated by 10%p.a. on Written Down value Method:. Single choice.
a. Both Value will be equal
b. Value of Machinery II is more by Rs.2,000
c. Value of Machinery I is more by Rs.4,000
d. Value of Machinery II is more by Rs.4,000
Answers
Explanation:
a.Both value will be equal
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Given:
What is the amount of difference between the closing Balance of 2 machines after 2 years, if both the machine were purchased on the same date and with the same amount i.e., Rs.2,00,000.Machine I is depreciated by 10% p. a. under Straight Line Method and Machine II is depreciated by 10%p.a. under Written Down value Method:
To Find:
a. Both values will be equal
b. Value of Machinery II is more by Rs.2,000
c. Value of Machinery I is more by Rs.4,000
d. Value of Machinery II is more by Rs.4,000
Solution:
Calculation of the amount of depreciation of machinery I under the straight-line method.
Depreciation for the first year,
200000 * 10% = 20000
depreciation for the second year,
200000 * 10% = 20000
value of machinery I at the end of 2 years (200000-40000) that is 160000.
Calculation of the amount of depreciation of machinery II underwritten down value method.
Depreciation for the first year = 200000 * 10% = 20000.
Depreciation for the second year = (200000- 20,000) * 10% = 18000.
Value of machinery II at the end of 2 years (200000-20000-18000) =162000
So the value of machinery under the WDV method is greater than the value of machiner under SLM by 2000 that is (162000-160000)
Hence, the correct option is (b).