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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.
The extra depreciation to be provided based on the changed method during the year is
- a)Rs. 24,959
- b)Rs. 17,500
- c)Rs. 10,500
- d)Rs. 46,763
Correct answer is option 'A'. Can you explain this answer?
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Most Upvoted Answer
B Limited has been charging depreciation on the straight line method. ...
Calculation of Depreciation under Straight Line Method
- Depreciation rate = 5%
- Depreciation for one year = 3,50,000 x 5% = Rs.17,500
- Depreciation for current year (assuming it is already charged) = Rs.17,500
Calculation of Depreciated Value after Retrospective Change in Depreciation Method
- Depreciated value under straight line method = Rs.2,97,500
- Original cost of machinery = Rs.3,50,000
- Depreciation charged under straight line method = Rs.52,500 (3,50,000 - 2,97,500)
- Remaining useful life of machinery = (3,50,000 - 2,97,500) / 17,500 = 3 years
- Depreciation charged under reducing balance method for the remaining useful life = (2,97,500 x 8% x 3) = Rs.71,400
- Extra depreciation to be provided based on the changed method during the year = Rs.71,400 - Rs.17,500 = Rs.24,900 (rounded off)
Therefore, the correct answer is option A, Rs.24,959.
- Depreciation rate = 5%
- Depreciation for one year = 3,50,000 x 5% = Rs.17,500
- Depreciation for current year (assuming it is already charged) = Rs.17,500
Calculation of Depreciated Value after Retrospective Change in Depreciation Method
- Depreciated value under straight line method = Rs.2,97,500
- Original cost of machinery = Rs.3,50,000
- Depreciation charged under straight line method = Rs.52,500 (3,50,000 - 2,97,500)
- Remaining useful life of machinery = (3,50,000 - 2,97,500) / 17,500 = 3 years
- Depreciation charged under reducing balance method for the remaining useful life = (2,97,500 x 8% x 3) = Rs.71,400
- Extra depreciation to be provided based on the changed method during the year = Rs.71,400 - Rs.17,500 = Rs.24,900 (rounded off)
Therefore, the correct answer is option A, Rs.24,959.
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Community Answer
B Limited has been charging depreciation on the straight line method. ...
Given:
- Original cost of equipment: ₹3,50,000
- Depreciated value (after charging SLM depreciation for the current year): ₹2,97,500
- Depreciation rate (SLM): 5% per annum
- Depreciation rate (RBM): 8% per annum
Step 1: Calculate the total depreciation charged under SLM
To determine how much depreciation has already been charged under SLM, we can subtract the current depreciated value from the original cost:
Total Depreciation (SLM) = ₹3,50,000 − ₹2,97,500 = ₹52,500
Step 2: Determine the number of years of depreciation under SLM
The annual depreciation under SLM is:
Annual Depreciation (SLM) = ₹3,50,000 × 5% = ₹17,500
Now, calculate the number of years the equipment has been depreciated:
Step 3: Calculate the written down value (WDV) after 3 years under RBM
If depreciation had been applied using the Reducing Balance Method (RBM) from the beginning, the WDV would be calculated as follows for each year:
If depreciation had been applied using the Reducing Balance Method (RBM) from the beginning, the WDV would be calculated as follows for each year:
- First year RBM depreciation:
Depreciation (1st year) = ₹3,50,000 × 8% = ₹28,000
WDV after 1st year = ₹3,50,000 − ₹28,000 = ₹3,22,000 - Second year RBM depreciation:
Depreciation (2nd year) = ₹3,22,000 × 8% = ₹25,760
WDV after 2nd year = ₹3,22,000 − ₹25,760 = ₹2,96,240 - Third year RBM depreciation:
Depreciation (3rd year) = ₹2,96,240 × 8% = ₹23,699.20
WDV after 3rd year = ₹2,96,240 − ₹23,699.20 = ₹2,72,540.80
Step 4: Compare the depreciation under SLM and RBM
Now, calculate the total depreciation that would have been charged under RBM over 3 years:
Total Depreciation (RBM) = ₹3,50,000 − ₹2,72,540.80 = ₹77,459.20
The total depreciation charged under SLM was ₹52,500, so the extra depreciation required is:
Extra Depreciation = ₹77,459.20 − ₹52,500 = ₹24,959.20
The extra depreciation to be provided based on the changed method is ₹24,959, so the correct answer is: A: ₹24,959.
Now, calculate the total depreciation that would have been charged under RBM over 3 years:
Total Depreciation (RBM) = ₹3,50,000 − ₹2,72,540.80 = ₹77,459.20
The total depreciation charged under SLM was ₹52,500, so the extra depreciation required is:
Extra Depreciation = ₹77,459.20 − ₹52,500 = ₹24,959.20
The extra depreciation to be provided based on the changed method is ₹24,959, so the correct answer is: A: ₹24,959.
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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.The extra depreciation to be provided based on the changed method during the year isa)Rs. 24,959b)Rs. 17,500c)Rs. 10,500d)Rs. 46,763Correct answer is option 'A'. 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.The extra depreciation to be provided based on the changed method during the year isa)Rs. 24,959b)Rs. 17,500c)Rs. 10,500d)Rs. 46,763Correct answer is option 'A'. 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.The extra depreciation to be provided based on the changed method during the year isa)Rs. 24,959b)Rs. 17,500c)Rs. 10,500d)Rs. 46,763Correct answer is option 'A'. 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.The extra depreciation to be provided based on the changed method during the year isa)Rs. 24,959b)Rs. 17,500c)Rs. 10,500d)Rs. 46,763Correct answer is option 'A'. Can you explain this answer?.
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.The extra depreciation to be provided based on the changed method during the year isa)Rs. 24,959b)Rs. 17,500c)Rs. 10,500d)Rs. 46,763Correct answer is option 'A'. 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.The extra depreciation to be provided based on the changed method during the year isa)Rs. 24,959b)Rs. 17,500c)Rs. 10,500d)Rs. 46,763Correct answer is option 'A'. 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.The extra depreciation to be provided based on the changed method during the year isa)Rs. 24,959b)Rs. 17,500c)Rs. 10,500d)Rs. 46,763Correct answer is option 'A'. 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.The extra depreciation to be provided based on the changed method during the year isa)Rs. 24,959b)Rs. 17,500c)Rs. 10,500d)Rs. 46,763Correct answer is option 'A'. Can you explain this answer?, a detailed solution 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.The extra depreciation to be provided based on the changed method during the year isa)Rs. 24,959b)Rs. 17,500c)Rs. 10,500d)Rs. 46,763Correct answer is option 'A'. Can you explain this answer? has been provided alongside types of 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.The extra depreciation to be provided based on the changed method during the year isa)Rs. 24,959b)Rs. 17,500c)Rs. 10,500d)Rs. 46,763Correct answer is option 'A'. Can you explain this answer? theory, EduRev gives you an
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