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B Limited has been charging depreciation on the straight line method. It charges a full year depreciation even if the machinery is utilized only for part of the year. An equipment which was purchased for Rs.3,50,000 now stands at Rs.2,97,500 after depreciating at the rate of 5% on a straight line basis. Now the company decides to change the method of depreciation with retrospective effect. The applicable reducing balance rate for this machinery would be 8% p.a. Assuming that before the effect of this change could be accounted, depreciation for the current year is already charged based on straight line method and is reflected in the depreciated value of Rs.2,97,500.

Straight line depreciation per annum is

  • a)
    15,000

  • b)
    17,500

  • c)
    35,000

  • d)
    52,500

Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
B Limited has been charging depreciation on the straight line method. ...
Calculation of Straight Line Depreciation per Annum:

- The equipment was purchased for Rs.3,50,000 and the current value is Rs.2,97,500.
- Therefore, the total depreciation charged till date is Rs.3,50,000 - Rs.2,97,500 = Rs.52,500.
- This depreciation was charged on a straight line basis, which means it was spread evenly over the useful life of the equipment.
- The useful life would be the period from the date of purchase to the date when the equipment's value becomes zero.
- Since the equipment's value is decreasing at a rate of 5% per annum, the useful life would be 100/5 = 20 years.
- Therefore, the annual straight line depreciation would be Rs.52,500/20 = Rs.2,625.
- However, the question asks for the full year depreciation even if the equipment is utilized for only part of the year.
- Assuming that the equipment was utilized for half the year, the straight line depreciation for the current year would be Rs.2,625/2 = Rs.1,312.50.
- Therefore, the correct answer is option 'B' - Rs.17,500, which is the full year straight line depreciation charged by the company.

Calculation of Reducing Balance Rate:

- The reducing balance rate is the rate at which the company will charge depreciation on the equipment under the new method.
- The applicable rate for this machinery is 8% per annum.
- This means that every year, the company will charge depreciation at a rate of 8% on the remaining value of the equipment.
- For example, if the equipment's value at the beginning of the year is Rs.100,000, the depreciation charged for the year would be Rs.8,000 (8% of Rs.100,000).
- The value of the equipment at the end of the year would be Rs.92,000 (Rs.100,000 - Rs.8,000).
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Community Answer
B Limited has been charging depreciation on the straight line method. ...
Given:
  1. Purchase cost of the equipment: ₹3,50,000
  2. Depreciated value after current year (based on Straight Line Method): ₹2,97,500
  3. Depreciation rate (Straight Line Method): 5%
Step 1: Calculate Straight Line Depreciation
Using the Straight Line Method, depreciation is calculated as:
Annual Depreciation = Original Cost × Depreciation Rate
Substitute the given values:
Annual Depreciation = ₹3,50,000 × 5% = ₹17,500
The Straight Line Depreciation per annum is ₹17,500, so the correct answer is: B: ₹17,500.
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B Limited has been charging depreciation on the straight line method. It charges a full year depreciation even if the machinery is utilized only for part of the year. An equipment which was purchased for Rs.3,50,000 now stands at Rs.2,97,500 after depreciating at the rate of 5% on a straight line basis. Now the company decides to change the method of depreciation with retrospective effect. The applicable reducing balance rate for this machinery would be 8% p.a. Assuming that before the effect of this change could be accounted, depreciation for the current year is already charged based on straight line method and is reflected in the depreciated value of Rs.2,97,500.Straight line depreciation per annum isa)15,000b)17,500c)35,000d)52,500Correct answer is option 'B'. Can you explain this answer?
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B Limited has been charging depreciation on the straight line method. It charges a full year depreciation even if the machinery is utilized only for part of the year. An equipment which was purchased for Rs.3,50,000 now stands at Rs.2,97,500 after depreciating at the rate of 5% on a straight line basis. Now the company decides to change the method of depreciation with retrospective effect. The applicable reducing balance rate for this machinery would be 8% p.a. Assuming that before the effect of this change could be accounted, depreciation for the current year is already charged based on straight line method and is reflected in the depreciated value of Rs.2,97,500.Straight line depreciation per annum isa)15,000b)17,500c)35,000d)52,500Correct answer is option 'B'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about B Limited has been charging depreciation on the straight line method. It charges a full year depreciation even if the machinery is utilized only for part of the year. An equipment which was purchased for Rs.3,50,000 now stands at Rs.2,97,500 after depreciating at the rate of 5% on a straight line basis. Now the company decides to change the method of depreciation with retrospective effect. The applicable reducing balance rate for this machinery would be 8% p.a. Assuming that before the effect of this change could be accounted, depreciation for the current year is already charged based on straight line method and is reflected in the depreciated value of Rs.2,97,500.Straight line depreciation per annum isa)15,000b)17,500c)35,000d)52,500Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for B Limited has been charging depreciation on the straight line method. It charges a full year depreciation even if the machinery is utilized only for part of the year. An equipment which was purchased for Rs.3,50,000 now stands at Rs.2,97,500 after depreciating at the rate of 5% on a straight line basis. Now the company decides to change the method of depreciation with retrospective effect. The applicable reducing balance rate for this machinery would be 8% p.a. Assuming that before the effect of this change could be accounted, depreciation for the current year is already charged based on straight line method and is reflected in the depreciated value of Rs.2,97,500.Straight line depreciation per annum isa)15,000b)17,500c)35,000d)52,500Correct answer is option 'B'. Can you explain this answer?.
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