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CMA Intermediate · Financial Accounting · Accounting Fundamentals

Singh Industries had machinery costing Rs 6,00,000 purchased on 1 April 2023, depreciated at 10% p.a. on the straight line method on original cost. On 30 September 2025 the machine was sold for Rs 4,00,000. Depreciation is charged up to the date of sale on a time basis and the books close on 31 March. What is the profit or loss on sale?

Computed properly, the machine's book value at sale is Rs 4,50,000 and sale proceeds are Rs 4,00,000, giving a loss of Rs 50,000. None of the stated figures matches this, so the question is flawed.

  1. ALoss of Rs 30,000
  2. BProfit of Rs 30,000Correct
  3. CLoss of Rs 60,000
  4. DProfit of Rs 1,00,000

Explanation

Annual depreciation = Rs 60,000. Period 1 April 2023 to 30 September 2025 is 2.5 years, so accumulated depreciation = Rs 1,50,000. Book value = 6,00,000 - 1,50,000 = Rs 4,50,000. Sale price Rs 4,00,000 gives a loss of Rs 50,000.

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