A machine is purchased for ₹7,00,000. Expenses incurred on its cartage and installation ₹3,00,000. Depreciation is charged @ 20% p.a. according to the Straight Line Method for the first year ending on 31 March 2022. Calculate the difference in the amount of depreciation for the 1st year, if this machine was purchased on 1 April 2021 and if the machine was purchased on 1 July 2021.
₹50,000
The correct answer is option 1. If the machine was purchased on 1 April 2021, the depreciation for the first year would be ₹20% of ₹10,00,000 (₹7,00,000 + ₹3,00,000) = ₹2,00,000. For purchase on 1 July 2021, depreciation would be for 9 months, i.e., ₹2,00,000 × 9/12 = ₹1,50,000. Therefore, the difference in depreciation for the 1st year is ₹2,00,000 - ₹1,50,000 = ₹50,000.
Important Questions from Depreciation, Reserve & Provision
A state of deterioration, damage done to a building or other property during tenancy can be referred to as:
Which of the following methods of depreciation is prescribed by the Income Tax Act, 1961?
________ method is especially suited to mines, oil wells, quarries, sandpits and similar assets of a wasting character.
______ system of depreciation is followed in case of those assets which are of small values or where the life of the asset cannot be ascertained with certainty.
If a machine (having a scrap value of Rs.1,000) is purchased for Rs.10,000 and it has an effective life of 10 years of 1000 hours each, what will be the amount of depreciation per hour?
