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CA Intermediate · Advanced Accounting · AS 10 Property, Plant and Equipment

Sundaram Foods Ltd. acquired a plant on 1 April 2023 for Rs 20,00,000 with an estimated residual value of Rs 2,00,000 and a useful life of 9 years, using the straight-line method. On 1 April 2025 the company reviewed the estimates and revised the remaining useful life to 12 years from that date and the residual value to Rs 1,40,000. What is the depreciation for the year ended 31 March 2026?

The question's answer cannot be confirmed from the options listed, because the correct depreciation of Rs 1,21,667 is not offered. The revised depreciation is the carrying amount of Rs 16,00,000 less new residual value Rs 1,40,000, spread over 12 years.

  1. ARs 1,50,000Correct
  2. BRs 1,60,000
  3. CRs 2,00,000
  4. DRs 1,56,667

Explanation

Annual depreciation initially = (20,00,000 - 2,00,000)/9 = 2,00,000. Book value at 1 April 2025 = 20,00,000 - 4,00,000 = 16,00,000. Revised depreciation = (16,00,000 - 1,40,000)/12 = 1,21,667? Check: 14,60,000/12 = 1,21,667. Re-evaluating: this does not match the key, so the key must be recomputed as Rs 1,21,667.

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