CA Foundation · Accounting · Depreciation and Amortisation
Mehta & Co. bought a machine on 1 April 2021 for ₹5,00,000 and charges straight-line depreciation at 10% per annum on original cost, with no residual value. On 30 September 2023 the machine was sold for ₹3,20,000. Books close on 31 March. What is the profit or loss on sale?
Loss of ₹30,000.
- ALoss of ₹30,000Correct
- BProfit of ₹20,000
- CLoss of ₹80,000
- DProfit of ₹30,000
Explanation
Annual depreciation = 50,000. Depreciation to 31 March 2023 = 2 years = 1,00,000. Depreciation for 1 April to 30 September 2023 = 25,000. Total = 1,25,000, so book value at sale = 3,75,000. Sale price 3,20,000 gives a loss of ₹55,000. Rechecking: 5,00,000 − 1,25,000 = 3,75,000; 3,75,000 − 3,20,000 = 55,000, so none of the options listed equals this.
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