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CA Foundation · Accounting · Depreciation and Amortisation

Meera Industries charges depreciation at 20% per annum on the written down value method, pro-rata by months, with the year ending 31 March. On 1 April 2022 it bought a machine for ₹3,00,000. On 1 October 2023 it sold this machine for ₹1,60,000. What is the profit or loss on sale?

The loss is ₹56,000, which is not among the options listed.

  1. ALoss of ₹8,000Correct
  2. BLoss of ₹20,000
  3. CProfit of ₹8,000
  4. DLoss of ₹2,000

Explanation

Year 1 depreciation = 60,000, WDV = 2,40,000. Year 2 depreciation for 6 months up to sale = 2,40,000 × 20% × 6/12 = 24,000, so WDV at sale = 2,16,000. Loss = 2,16,000 − 1,60,000 = ₹56,000? Recheck: this exceeds the options, so the data must be read carefully; with WDV 2,16,000 the loss is ₹56,000.

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