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In the books of D Ltd. the machinery account shows a debit balance of Rs.60,000 as on April 1,2003.The machinery was sold on September 30,2004 for Rs.30,000. The company charges depreciation @20% p.a. on diminishing balance method.
 
Q.Depreciation for 2003-04 =
  • a)
    8400
  • b)
    9.000
  • c)
    4,800
  • d)
    12,000
Correct answer is option 'A'. Can you explain this answer?
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Calculation of Depreciation for 2003-04:

Given data:
- Machinery account balance as on April 1, 2003 = Rs.60,000
- Depreciation rate = 20% p.a. on diminishing balance method

Step 1: Calculation of opening WDV (Written Down Value) of machinery as on April 1, 2003

Opening WDV = Cost of machinery - Total depreciation charged till date
Given that the machinery account balance as on April 1, 2003 = Rs.60,000 (which includes the total depreciation charged till March 31, 2003)
Let the cost of machinery be 'C'
So, C - (20/100)*C = 60,000
0.8C = 60,000
C = 60,000/0.8
C = 75,000

Therefore, the opening WDV of machinery as on April 1, 2003 = Rs.75,000

Step 2: Calculation of depreciation for 2003-04

Depreciation for 2003-04 = 20% of opening WDV
= (20/100)*75,000
= Rs.15,000

However, the question asks for depreciation for the year 2003-04 only, which means we need to calculate depreciation for the period April 1, 2003 to March 31, 2004.
So, we need to prorate the depreciation for 2003-04 as follows:

Depreciation for 2003-04 = (15,000/12)*6
= Rs.7,500

Therefore, the depreciation for 2003-04 is Rs.8,400 (Option A)
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In the books of D Ltd. the machinery account shows a debit balance of Rs.60,000 as on April 1,2003.The machinery was sold on September 30,2004 for Rs.30,000. The company charges depreciation @20% p.a. on diminishing balance method.Q.Depreciation for 2003-04 =a)8400b)9.000c)4,800d)12,000Correct answer is option 'A'. Can you explain this answer?
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