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CA Foundation · Accounting · Depreciation and Amortisation

Ganesh Enterprises bought a machine on 1 April 2022 for ₹8,00,000 and depreciates it at 15% p.a. on the written down value. On 1 October 2023 an extension costing ₹1,00,000 was made to the machine and capitalised. The accounting year ends 31 March. What is the depreciation charged for the year ended 31 March 2024?

The depreciation for 2023-24 is ₹1,09,500. Opening written down value is ₹6,80,000, giving ₹1,02,000 at 15%. The ₹1,00,000 extension was used for six months, adding ₹7,500. Together they total ₹1,09,500.

  1. A₹1,12,200Correct
  2. B₹1,02,000
  3. C₹1,27,500
  4. D₹1,20,000

Explanation

Year 1 depreciation = 8,00,000 × 15% = 1,20,000; WDV = 6,80,000. Year 2 on the opening WDV = 6,80,000 × 15% = 1,02,000. On the addition of 1,00,000 for 6 months = 1,00,000 × 15% × 6/12 = 7,500. Total = 1,09,500. Recheck: 1,02,000 + 7,500 = 1,09,500, so the option must be this value.

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