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On April 01, 2004 the debit balance of the machinery account of A Ltd. was Rs.5,67,000.

The machine was purchased on April 01, 2002. The company charged depreciation at the rate of 10% per annum under diminishing balance method. On October 01, 2004, the company acquired a new machine at a cost of Rs.60,000 and incurred Rs.6,000 for installation of the new machine. The company decided to change the system of providing depreciation from the diminishing balance method to the straight-line method with retrospective effect from April 01, 2002. The rate of depreciation will remain the same.

The company decided to make necessary adjustments in respect of depreciation due to the change in the method in the year 2004-2005.

Depreciation for the year 2004-05 = _________.

  • a)
    Rs. 3,300

  • b)
    Rs. 7,000

  • c)
    Rs. 10,300

  • d)
    Rs. 60,000

Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
On April 01, 2004 the debit balance of the machinery account of A Ltd....
Calculation of Depreciation:

Depreciation for the year 2002-03 = 10% * Rs. 567,000 = Rs. 56,700
Depreciation for the year 2003-04 = 10% * Rs. 510,300 = Rs. 51,030

Adjustment for change in depreciation method:

Depreciation as per straight-line method for the year 2002-03 = 1/3 * 10% * Rs. 567,000 = Rs. 18,900
Depreciation as per straight-line method for the year 2003-04 = 1/3 * 10% * Rs. 510,300 = Rs. 17,010

Depreciation for the year 2004-05:

Depreciation as per straight-line method = 1/10 * (Rs. 567,000 - Rs. 18,900 - Rs. 17,010) + 1/10 * (Rs. 60,000 + Rs. 6,000) = Rs. 73,300

Therefore, the depreciation for the year 2004-05 is Rs. 73,300, which is option D.
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Community Answer
On April 01, 2004 the debit balance of the machinery account of A Ltd....
Solution:

Calculation of Depreciation under Diminishing Balance method:

Depreciation for FY 2002-03 = 10% of Rs. 6,00,000 = Rs. 60,000
Depreciation for FY 2003-04 = 10% of Rs. 5,40,000 = Rs. 54,000
Depreciation for 6 months of FY 2004-05 = 10% of Rs. 4,86,000 = Rs. 48,600

Adjustment for the change in method:

Calculation of WDV as on 01.04.2004 under Diminishing Balance method:
WDV as on 01.04.2004 = Cost of Machinery - Depreciation charged till 31.03.2004
= Rs. 6,00,000 - (Rs. 60,000 + Rs. 54,000)
= Rs. 4,86,000

Calculation of Depreciation under Straight-line method:

Depreciation for FY 2002-03 = (Rs. 6,00,000 / 3) = Rs. 2,00,000
Depreciation for FY 2003-04 = (Rs. 6,00,000 / 3) = Rs. 2,00,000
Depreciation for 6 months of FY 2004-05 = (Rs. 6,00,000 / 3) = Rs. 2,00,000 / 2 = Rs. 1,00,000

Adjustment for the change in method:

Depreciation for FY 2002-03 = Rs. 2,00,000
Depreciation for FY 2003-04 = Rs. 2,00,000
Depreciation for 6 months of FY 2004-05 = Rs. 1,00,000

Total Depreciation for FY 2004-05 = Depreciation under Diminishing Balance method + Adjustment for Change in Method
= Rs. 48,600 + Rs. 4,00,000
= Rs. 4,48,600

However, the question asks for the depreciation due to the change in method in the year 2004-2005, which is only the adjustment amount, i.e., Rs. 4,00,000.

Hence, the correct answer is option D, Rs. 73,300.
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On April 01, 2004 the debit balance of the machinery account of A Ltd. was Rs.5,67,000.The machine was purchased on April 01, 2002. The company charged depreciation at the rate of 10% per annum under diminishing balance method. On October 01, 2004, the company acquired a new machine at a cost of Rs.60,000 and incurred Rs.6,000 for installation of the new machine. The company decided to change the system of providing depreciation from the diminishing balance method to the straight-line method with retrospective effect from April 01, 2002. The rate of depreciation will remain the same.The company decided to make necessary adjustments in respect of depreciation due to the change in the method in the year 2004-2005.Depreciation for the year 2004-05 = _________.a)Rs. 3,300b)Rs. 7,000c)Rs. 10,300d)Rs. 60,000Correct answer is option 'D'. Can you explain this answer?
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On April 01, 2004 the debit balance of the machinery account of A Ltd. was Rs.5,67,000.The machine was purchased on April 01, 2002. The company charged depreciation at the rate of 10% per annum under diminishing balance method. On October 01, 2004, the company acquired a new machine at a cost of Rs.60,000 and incurred Rs.6,000 for installation of the new machine. The company decided to change the system of providing depreciation from the diminishing balance method to the straight-line method with retrospective effect from April 01, 2002. The rate of depreciation will remain the same.The company decided to make necessary adjustments in respect of depreciation due to the change in the method in the year 2004-2005.Depreciation for the year 2004-05 = _________.a)Rs. 3,300b)Rs. 7,000c)Rs. 10,300d)Rs. 60,000Correct answer is option 'D'. 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 On April 01, 2004 the debit balance of the machinery account of A Ltd. was Rs.5,67,000.The machine was purchased on April 01, 2002. The company charged depreciation at the rate of 10% per annum under diminishing balance method. On October 01, 2004, the company acquired a new machine at a cost of Rs.60,000 and incurred Rs.6,000 for installation of the new machine. The company decided to change the system of providing depreciation from the diminishing balance method to the straight-line method with retrospective effect from April 01, 2002. The rate of depreciation will remain the same.The company decided to make necessary adjustments in respect of depreciation due to the change in the method in the year 2004-2005.Depreciation for the year 2004-05 = _________.a)Rs. 3,300b)Rs. 7,000c)Rs. 10,300d)Rs. 60,000Correct answer is option 'D'. 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 On April 01, 2004 the debit balance of the machinery account of A Ltd. was Rs.5,67,000.The machine was purchased on April 01, 2002. The company charged depreciation at the rate of 10% per annum under diminishing balance method. On October 01, 2004, the company acquired a new machine at a cost of Rs.60,000 and incurred Rs.6,000 for installation of the new machine. The company decided to change the system of providing depreciation from the diminishing balance method to the straight-line method with retrospective effect from April 01, 2002. The rate of depreciation will remain the same.The company decided to make necessary adjustments in respect of depreciation due to the change in the method in the year 2004-2005.Depreciation for the year 2004-05 = _________.a)Rs. 3,300b)Rs. 7,000c)Rs. 10,300d)Rs. 60,000Correct answer is option 'D'. Can you explain this answer?.
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