A machine is purchased for Rs7,00,000. Expenses incurred on its cartage and installation Rs3,00,000. Calculate the amount of depreciation @ 20% p.a. according to Straight Line Method for the first year ending on 31st March, 2022, if this machine is purchased on 1st July, 2021.
Rs1,50,000
The correct answer is option 1. The total cost of the machine is Rs7,00,000 + Rs3,00,000 = Rs10,00,000. Depreciation for the first year = 20% of Rs10,00,000 = Rs2,00,000. However, since the machine was purchased on 1st July, 2021, for the first year, depreciation is charged for 9 months (from July 1st to March 31st). Therefore, the depreciation for the first year = Rs2,00,000 × 9/12 = Rs1,50,000.
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?
