On 1st Apirl, 2016, a firm purchased a machinery for ₹ 1,05,000. The scrap value was estimated to be ₹ 5,000 at the end of asset’s 10 year’s life.
On 1st Apirl, 2016, a firm purchased a machinery for ₹ 1,05,000. The scrap value was estimated to be ₹ 5,000 at the end of asset’s 10 year’s life. Straight Line Method of depreciation was used. The accounting year ends on 31st March every year. The machine was sold for ₹ 6,000 on 31st March, 2023. Calculate the following:
(i) The Depreciation expense for the year ended 31st March, 2017.
(ii) The net book value of the asset on 31st March, 2021.
(iii) The gain or loss on sale of the machine on 31st March, 2023.
Anurag Pathak Changed status to publish September 27, 2023
Solution:-
i) The depreciation expenses in the first year
= (₹ 10,5000 – 5000)/10 = ₹ 10,000
ii) The net book value of the asset on 31st March 2021
= ₹ 1,05,000 – 10,000 ✕ 5 = ₹ 55,000
iii) The loss on the sale of the asset on 31st March 2023
= ₹ 1,05,000 – 1000 ✕ 7 – 600 = ₹ 29,000
Anurag Pathak Changed status to publish September 27, 2023
