Question 15 Marks
A firm bought a machinery for ₹ 7,40,000 on 1st April, 2020 and ₹ 60,000 is spent on its installation. Its useful life is estimated to be of 5 years. Its scrap value at the end of 5 years is estimated to be ₹ 40,000. Find the amount of annual depreciation and the rate of depreciation.
Answer
View full question & answer→Cost = 740000 + 60,000 = ₹ 8,00,000
Determination of the amount of annual Depreciation and Rate of Depreciation = $\frac{\text { Cost of Asset - Estimated Realisable or Scrap }}{\text { No. of year of estimated useful life }}$
$=\frac{(740000+₹ 60,000)-₹ 40000}{5 .}$
= ₹ 1,52,000
Rate of Depreciation $=\frac{\text { Annual depreciation }}{\cos 1 \text { of Asset }} \times 100$.
$=\frac{1,52,000}{800,000} \times 100=19 \%$ p.a.
Determination of the amount of annual Depreciation and Rate of Depreciation = $\frac{\text { Cost of Asset - Estimated Realisable or Scrap }}{\text { No. of year of estimated useful life }}$
$=\frac{(740000+₹ 60,000)-₹ 40000}{5 .}$
= ₹ 1,52,000
Rate of Depreciation $=\frac{\text { Annual depreciation }}{\cos 1 \text { of Asset }} \times 100$.
$=\frac{1,52,000}{800,000} \times 100=19 \%$ p.a.

