A form purchased a machine for rupees 80000 on 1.4 .2000. it was depre...
Depreciation of the Machine on Written Down Value Method (1.4.2000 - 31.3.2002)
Under the written down value method, the depreciation is calculated based on the initial cost of the machine and the rate of depreciation. In this case, the machine was purchased for rupees 80000 on 1.4.2000 and the rate of depreciation is 10%.
Calculation of Depreciation:
Year 1 (1.4.2000 - 31.3.2001):
Depreciation = Opening Value * Rate of Depreciation
= 80000 * 10% = 8000
Closing Value = Opening Value - Depreciation
= 80000 - 8000 = 72000
Year 2 (1.4.2001 - 31.3.2002):
Depreciation = Opening Value * Rate of Depreciation
= 72000 * 10% = 7200
Closing Value = Opening Value - Depreciation
= 72000 - 7200 = 64800
Depreciation of the Machine on Straight Line Method (1.4.2002 - 1.4.2003)
On 31.3.2002, the company decided to change the method of depreciation from the written down value method to the straight-line method. The straight-line method calculates depreciation by evenly distributing the cost of the asset over its useful life.
Calculation of Depreciation:
Cost of the Machine = 64800 (as of 31.3.2002)
Useful Life = 3 years
Annual Depreciation = Cost of the Machine / Useful Life
= 64800 / 3 = 21600 / year
Year 1 (1.4.2002 - 31.3.2003):
Depreciation = Annual Depreciation
= 21600
Closing Value = Opening Value - Depreciation
= 64800 - 21600 = 43200
Summary of Paper Machinery Account
1.4.2000 - 31.3.2001:
Opening Value: 80000
Depreciation: 8000
Closing Value: 72000
1.4.2001 - 31.3.2002:
Opening Value: 72000
Depreciation: 7200
Closing Value: 64800
1.4.2002 - 31.3.2003:
Opening Value: 64800
Depreciation: 21600
Closing Value: 43200
The Paper Machinery account shows the initial cost of the machine, the depreciation calculated under the written down value method for the first two years, and the depreciation calculated under the straight-line method for the third year. The closing value represents the net book value of the machine at the end of each year.
A form purchased a machine for rupees 80000 on 1.4 .2000. it was depre...
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