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CA Foundation · Accounting · Depreciation and Amortisation

Anand Ltd. has machinery with a book value of ₹1,20,000 at 1 April 2023, depreciated at 10% on WDV. On 1 October 2023 it sold part of the machinery, whose book value on 1 April 2023 was ₹40,000, for ₹30,000. Depreciation is pro-rata by months. What is the loss on sale?

The loss is ₹8,000.

  1. A₹6,000Correct
  2. B₹8,000
  3. C₹10,000
  4. D₹4,000

Explanation

Depreciation on the sold item for 6 months = 40,000 × 10% × 6/12 = 2,000. Book value at sale = 38,000. Loss = 38,000 − 30,000 = ₹8,000. Hence the key is ₹8,000, and ₹10,000 ignores the current-year depreciation.

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