CMA Foundation · Fundamentals of Financial and Cost Accounting · Financial Statements of Sole Proprietorship
Arun Enterprises has machinery with a book value of Rs 2,40,000 on 1 April 2025 and depreciates it at 20% per annum on the diminishing balance method. On 1 October 2025 it purchased additional machinery for Rs 1,00,000 with the same rate applicable. What is the total depreciation for the year ended 31 March 2026?
Total depreciation is Rs 58,000. The opening machinery is depreciated at 20% on Rs 2,40,000, giving Rs 48,000. The machinery bought on 1 October is used for six months, so its depreciation is 20% of Rs 1,00,000 for half a year, Rs 10,000.
- ARs 58,000Correct
- BRs 68,000
- CRs 48,000
- DRs 53,000
Explanation
Depreciation on the old machinery is 20% of 2,40,000 = Rs 48,000. The new machinery was used for 6 months, so depreciation is 20% of 1,00,000 x 6/12 = Rs 10,000. Total is Rs 58,000. Rs 68,000 ignores the part-year period for the new asset.
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