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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.
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.
Further depreciation to be provided = ______.
- a)Rs. 5,670
- b)Rs. 7,000
- c)Rs. 6,300
- d)Rs. 7,778
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted 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 the year 2002-03 = 10% of Rs.5,67,000 = Rs.56,700
Depreciation for the year 2003-04 = 10% of Rs.5,67,000 – Rs.56,700 = Rs.51,030
Depreciation for the period April 01, 2004 to September 30, 2004 = 10% of Rs.5,67,000 – Rs.1,07,730 = Rs.45,957
Calculation of written down value as on October 01, 2004:
Written down value as on October 01, 2004 = Rs.5,67,000 – Rs.56,700 – Rs.51,030 – Rs.45,957 = Rs.4,13,313
Calculation of depreciation under straight-line method:
Depreciation for the year 2002-03 = 10% of Rs.5,67,000 = Rs.56,700
Depreciation for the year 2003-04 = 10% of Rs.5,67,000 = Rs.56,700
Depreciation for the year 2004-05 = (Rs.4,13,313 – Rs.60,000 – Rs.6,000) / 3 = Rs.1,15,771
Adjustment of depreciation for the year 2004-05:
Under the diminishing balance method, the company has already provided depreciation of Rs.45,957 for the period April 01, 2004 to September 30, 2004. Therefore, the company needs to adjust Rs.1,15,771 – Rs.45,957 = Rs.69,814 in the year 2004-05.
Hence, the further depreciation to be provided is Rs.7,000 (approx.) [Option (c)]
Calculation of depreciation under diminishing balance method:
Depreciation for the year 2002-03 = 10% of Rs.5,67,000 = Rs.56,700
Depreciation for the year 2003-04 = 10% of Rs.5,67,000 – Rs.56,700 = Rs.51,030
Depreciation for the period April 01, 2004 to September 30, 2004 = 10% of Rs.5,67,000 – Rs.1,07,730 = Rs.45,957
Calculation of written down value as on October 01, 2004:
Written down value as on October 01, 2004 = Rs.5,67,000 – Rs.56,700 – Rs.51,030 – Rs.45,957 = Rs.4,13,313
Calculation of depreciation under straight-line method:
Depreciation for the year 2002-03 = 10% of Rs.5,67,000 = Rs.56,700
Depreciation for the year 2003-04 = 10% of Rs.5,67,000 = Rs.56,700
Depreciation for the year 2004-05 = (Rs.4,13,313 – Rs.60,000 – Rs.6,000) / 3 = Rs.1,15,771
Adjustment of depreciation for the year 2004-05:
Under the diminishing balance method, the company has already provided depreciation of Rs.45,957 for the period April 01, 2004 to September 30, 2004. Therefore, the company needs to adjust Rs.1,15,771 – Rs.45,957 = Rs.69,814 in the year 2004-05.
Hence, the further depreciation to be provided is Rs.7,000 (approx.) [Option (c)]
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Community Answer
On April 01, 2004 the debit balance of the machinery account of A Ltd....
Given:
- Debit balance of machinery on April 01, 2004: ₹5,67,000
- Machine purchase date: April 01, 2002
- Depreciation rate: 10% per annum
- Diminishing Balance Method used until the change
- Change to the Straight Line Method with retrospective effect from April 01, 2002
Step 1: Calculate depreciation using the Diminishing Balance Method (already provided up to April 01, 2004)
We need to compute how much depreciation has been charged so far under the Diminishing Balance Method.
- Initial cost of machinery on April 01, 2002: ₹6,30,000 (as calculated earlier)
- Depreciation for 2002-03 under DBM = 10% of ₹6,30,000 = ₹63,000
- Closing balance on April 01, 2003: ₹6,30,000 - ₹63,000 = ₹5,67,000
- Depreciation for 2003-04 under DBM = 10% of ₹5,67,000 = ₹56,700
- Closing balance on April 01, 2004: ₹5,67,000 - ₹56,700 = ₹5,10,300
Step 2: Depreciation under the Straight Line Method (SLM)
The company decided to retrospectively apply the SLM from April 01, 2002. We need to calculate the depreciation using SLM for the two years (2002-03 and 2003-04).
- Total depreciable amount = Cost of the machine - Residual value
- Residual value is not provided, so we assume it to be zero.
- Depreciable amount = ₹6,30,000 (initial cost)
Depreciation per year under SLM:
Total depreciation for 2 years under SLM (2002-03 and 2003-04):
Total Depreciation under SLM = ₹63,000 × 2 = ₹1,26,000
Depreciation already charged under DBM:
Total depreciation for 2 years under SLM (2002-03 and 2003-04):
Total Depreciation under SLM = ₹63,000 × 2 = ₹1,26,000
Depreciation already charged under DBM:
- 2002-03: ₹63,000
- 2003-04: ₹56,700
- Total Depreciation under DBM = ₹63,000 + ₹56,700 = ₹1,19,700
Step 3: Calculate further depreciation to be provided
Further depreciation = Depreciation under SLM - Depreciation already charged under DBM
Further Depreciation = ₹1,26,000 − ₹1,19,700 = ₹6,300
The further depreciation to be provided is ₹6,300, so the correct answer is C: ₹6,300.
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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.Further depreciation to be provided = ______.a)Rs. 5,670b)Rs. 7,000c)Rs. 6,300d)Rs. 7,778Correct answer is option 'C'. 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.Further depreciation to be provided = ______.a)Rs. 5,670b)Rs. 7,000c)Rs. 6,300d)Rs. 7,778Correct answer is option 'C'. 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.Further depreciation to be provided = ______.a)Rs. 5,670b)Rs. 7,000c)Rs. 6,300d)Rs. 7,778Correct answer is option 'C'. 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.Further depreciation to be provided = ______.a)Rs. 5,670b)Rs. 7,000c)Rs. 6,300d)Rs. 7,778Correct answer is option 'C'. Can you explain this answer?.
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.Further depreciation to be provided = ______.a)Rs. 5,670b)Rs. 7,000c)Rs. 6,300d)Rs. 7,778Correct answer is option 'C'. 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.Further depreciation to be provided = ______.a)Rs. 5,670b)Rs. 7,000c)Rs. 6,300d)Rs. 7,778Correct answer is option 'C'. 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.Further depreciation to be provided = ______.a)Rs. 5,670b)Rs. 7,000c)Rs. 6,300d)Rs. 7,778Correct answer is option 'C'. Can you explain this answer?.
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