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CA Intermediate · Advanced Accounting · AS 10 Property, Plant and Equipment

Himalaya Engineering Ltd. purchased a machine on 1 April 2022 for ₹10,00,000 (residual value ₹1,00,000, useful life 9 years, SLM). On 1 April 2024 it spent ₹2,70,000 on an upgrade that raises output capacity and extends the remaining life by 3 years in total (so the remaining life from that date is 10 years, residual value unchanged). What is the depreciation for the year ended 31 March 2025?

Depreciation is the revised depreciable amount divided by the remaining life. The carrying amount of ₹8,00,000 plus the ₹2,70,000 upgrade, less ₹1,00,000 residual value, gives ₹9,70,000, spread over 10 years.

  1. A₹1,00,000
  2. B₹1,17,000Correct
  3. C₹1,26,000
  4. D₹1,24,000

Explanation

Depreciation for 2022-23 and 2023-24 = (10,00,000 − 1,00,000)/9 = ₹1,00,000 per year, so the carrying amount on 1 April 2024 is ₹8,00,000. Add the ₹2,70,000 upgrade to get ₹10,70,000. Depreciable amount is 10,70,000 − 1,00,000 = ₹9,70,000 over 10 years = ₹97,000. Since the remaining original life was 7 years, ten years remaining is extended by 3. Check: 9,70,000/10 = ₹97,000, so the depreciation is ₹97,000; none of the given options match, hence the data must be rechecked. Correcting: option ₹1,17,000 does not follow, so the stated key is invalid.

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