Wildcat Ltd, a manufacturing company sold a machinery for Rs 8 lacs at the year end. The company had purchased the machinery four years back for Rs 15 lacs and had depreciated the same using written down value method of depreciation @ 20%.
As an accounts executive of Wildcat Ltd, calculate the WDV of the asset for the four years, accumulated depreciation for four years and profit/loss on sale, if any.
Answers
Answer:
Depreciation rate is 20% and price of machinery is 1,500,000 WDV, Accumulated Depreciation and Profit is calculated.
There is a profit of 1,85,600
Cost of machinery = 15,00,000 (Given)
Sale price of machinery = 8,00,000 (Given)
Time when the machinery was purchased = 4yrs (Given)
Thus,
Depreciation for 1st year will be -
15,00,000 × 20/100
= 3,00,000
Depreciation for 2nd year will be -
= 15,00,000 - 3,00,000 × 20/100
= 2,40,000
Depreciation for 3rd year will be -
= 15,00,000 - 3,00,000 - 2,40,000) × 20/100
= 9,60,000 × 20/100
= 1,92,000
Depreciation for 4th year will be -
= 15,00,000 - 3,00,000 - 2,40,000 - 1,92,000) × 20/100
= 7,68,000 × 20/100
= 1,53,600
Cost of machine after depreciation = 6,14,400
Profit on sale = 8,00,000 - 6,14,400
= 1,85,600
Thus, there is a profit of Rs. 1,85,600