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.
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