CA Foundation · Accounting · Depreciation and Amortisation
Tulsi Traders purchased a machine for ₹5,00,000 on 1 April 2022. It charges depreciation under the depletion-like usage basis: the machine is expected to produce 1,00,000 units over its life with a residual value of ₹50,000. Production was 15,000 units in 2022-23 and 25,000 units in 2023-24. What is the book value of the machine at 31 March 2024?
The book value is ₹3,20,000. Depreciable amount is ₹4,50,000 over 1,00,000 units, or ₹4.50 per unit. Production of 40,000 units over two years gives depreciation of ₹1,80,000, which deducted from the cost of ₹5,00,000 leaves ₹3,20,000.
- A₹3,20,000Correct
- B₹2,70,000
- C₹3,00,000
- D₹1,80,000
Explanation
Depreciable amount = ₹5,00,000 − ₹50,000 = ₹4,50,000. Rate per unit = ₹4.50. Units produced = 40,000, so depreciation = ₹1,80,000. Book value = ₹5,00,000 − ₹1,80,000 = ₹3,20,000. Option ₹1,80,000 is the accumulated depreciation, not the book value.
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