CMA Intermediate · Financial Accounting · Accounting Fundamentals
Patel Engineering bought a machine on 1 April 2024 for Rs 4,00,000 and charges depreciation at 20% per annum on the written down value method. What is the depreciation charged for the year ending 31 March 2026?
The depreciation for the year ended 31 March 2026 is Rs 64,000. After the first year's charge of Rs 80,000 the written down value is Rs 3,20,000, and 20% of that opening balance gives Rs 64,000 for the second year.
- ARs 64,000Correct
- BRs 80,000
- CRs 1,44,000
- DRs 51,200
Explanation
Year 1 depreciation = 20% of 4,00,000 = Rs 80,000, so WDV is Rs 3,20,000. Year 2 depreciation = 20% of 3,20,000 = Rs 64,000. Rs 80,000 wrongly applies the rate to original cost, as in the straight line method.
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