Multiple choice

A machine purchased on 1.4.2003 for Rs. 10,00,000 was depreciated on straight line basis over its useful life of 10 years. On 1.4.2005, it was found that machine is in a good condition and will be used in the production for another 10 years. The amount of depreciation for the year ending 31.3.2006 will be

  1. Rs. 1,00,000

  2. Rs. 80,000

  3. Rs. 83,333

  4. Rs. 66,667
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Original cost Rs. 10,00,000, 10-year life = annual depreciation Rs. 1,00,000. After 2 years (2003-2005), accumulated depreciation = Rs. 2,00,000. Written down value on 1.4.2005 = Rs. 8,00,000. On revaluation, remaining useful life extended to 10 years. New annual depreciation = Rs. 8,00,000 / 10 years = Rs. 80,000 for year ending 31.3.2006. Option A continues old rate, Option C assumes 12-year total life, and Option D miscalculates the base.

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