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CMA Foundation · Fundamentals of Financial and Cost Accounting · Depreciation (Straight Line and Diminishing Balance Methods)

Kapoor & Sons purchased a machine for ₹1,00,000 on 1 January 2024 and charges depreciation at 20% p.a. on the diminishing balance method, with the year ending 31 March. Depreciation is charged for the period of use. What is the written down value on 31 March 2025?

The written down value on 31 March 2025 is ₹76,000. The first period carries three months of depreciation, ₹5,000, leaving ₹95,000. The next full year charges 20% of ₹95,000, which is ₹19,000, so the book value becomes ₹76,000.

  1. A₹75,000
  2. B₹76,000Correct
  3. C₹80,000
  4. D₹64,000

Explanation

Year ended 31 March 2024: 3 months = 1,00,000 × 20% × 3/12 = ₹5,000, WDV ₹95,000. Year ended 31 March 2025: 20% of 95,000 = ₹19,000, WDV ₹76,000. Using 80,000 ignores the part-year charge.

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