Advertisements
Advertisements
Question
A firm purchased a plant for ₹ 40,000. Erection charges amounted to ₹ 2,000. The effective life of the plant is 5 years. Calculate the amount of depreciation per year under the straight-line method.
Advertisements
Solution
Calculation of the amount of depreciation
Amount of depreciation = `("Original cost" - "Scrap value")/"Estimated life"`
Original cost = Purchase of plant + Erection charges
= ₹ 40,000 + ₹ 2,000 = ₹ 42,000
Estimated life = 5 years = `(₹ 42,000 - 0)/(5 "years")` = ₹ 8,400
APPEARS IN
RELATED QUESTIONS
Answer in One Sentence only:
Which account is credited when depreciation is charged?
State whether the following statement is True or False with reasons:
Wages paid for installation of Machinery are debited to Wages A/c.
Do you agree or disagree with the following statement:
By charging depreciation on fixed assets ascertainment of true and fair financial position is possible.
Complete the following sentence:
Depreciation = `"Cost of asset - _____________"/"Estimated Working Life of the Asset"`
If the rate of depreciation is the same, then the amount of depreciation under straight-line method vis-à-vis written down value method will be ______.
What is the annuity method?
Furniture was purchased for ₹ 1,00,000 on 1.7.2016. It is expected to last for 5 years. Estimated scrap at the end of five years is ₹ 10,000. Find out the rate of depreciation under the straight-line method.
A firm acquired a machine on 1st April 2015 at a cost of ₹ 50,000. Its life is 6 years. The firm writes off depreciation @ 30% p.a. on the diminishing balance method. The firm closes its books on 31st December every year. Show the machinery account and depreciation account for three years starting from 1st April 2015.
On 1st October 2014, a truck was purchased for ₹ 8,00,000 by Laxmi Transports Ltd. Depreciation was provided @ 15% p.a. under diminishing balance method. On 31st March 2017, the above truck was sold for ₹ 5,00,000. Accounts are closed on 31st March every year. Find out the profit or loss made on the sale of the truck.
A machine costing ₹ 23,000 is estimated to have a life of 7 years and the scrap value is estimated at ₹ 2,000 at the end of its useful life. Find out the amount of depreciation p.a.
