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A trader purchased machinery of rs10,000 in Jan 2004 Depreciation is charged 25% diminishing balance at the end of the third year it was sold for rs 1000 profit or loss on the sale of machine?
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A trader purchased machinery of rs10,000 in Jan 2004 Depreciation is c...
Depreciation and Sale of Machinery
Introduction:
In this question, we are given the information about the purchase and sale of machinery by a trader. We need to calculate the profit or loss made by the trader on the sale of machinery.
Calculation of Depreciation:
The trader purchased the machinery for Rs. 10,000 in Jan 2004. We are given that the depreciation charged by the trader is 25% diminishing balance. Depreciation charged each year is as follows:
Year 1: 25% of 10,000 = Rs. 2,500
Year 2: 25% of 7,500 (10,000-2,500) = Rs. 1,875
Year 3: 25% of 5,625 (7,500-1,875) = Rs. 1,406.25
So, the total depreciation charged by the trader in three years is Rs. 5,781.25.
Calculation of Profit/Loss on Sale:
At the end of the third year, the trader sold the machinery for Rs. 1000. To calculate the profit or loss, we need to compare the selling price with the book value of machinery.
Book value of machinery at the end of the third year can be calculated as follows:
Book value = Purchase price - Total Depreciation
Book value = Rs. 10,000 - Rs. 5,781.25 = Rs. 4,218.75
As we can see, the book value of machinery is higher than the selling price. Therefore, the trader has incurred a loss on the sale of machinery.
Profit/Loss = Selling Price - Book Value
Profit/Loss = Rs. 1000 - Rs. 4,218.75 = Rs. -3,218.75
The negative sign indicates that the trader has incurred a loss of Rs. 3,218.75 on the sale of machinery.
Conclusion:
In conclusion, we can say that the trader has incurred a loss of Rs. 3,218.75 on the sale of machinery. Depreciation charged by the trader reduces the value of the machinery over time, and the book value of machinery decreases. In this case, the selling price is lower than the book value, leading to a loss.
Introduction:
In this question, we are given the information about the purchase and sale of machinery by a trader. We need to calculate the profit or loss made by the trader on the sale of machinery.
Calculation of Depreciation:
The trader purchased the machinery for Rs. 10,000 in Jan 2004. We are given that the depreciation charged by the trader is 25% diminishing balance. Depreciation charged each year is as follows:
Year 1: 25% of 10,000 = Rs. 2,500
Year 2: 25% of 7,500 (10,000-2,500) = Rs. 1,875
Year 3: 25% of 5,625 (7,500-1,875) = Rs. 1,406.25
So, the total depreciation charged by the trader in three years is Rs. 5,781.25.
Calculation of Profit/Loss on Sale:
At the end of the third year, the trader sold the machinery for Rs. 1000. To calculate the profit or loss, we need to compare the selling price with the book value of machinery.
Book value of machinery at the end of the third year can be calculated as follows:
Book value = Purchase price - Total Depreciation
Book value = Rs. 10,000 - Rs. 5,781.25 = Rs. 4,218.75
As we can see, the book value of machinery is higher than the selling price. Therefore, the trader has incurred a loss on the sale of machinery.
Profit/Loss = Selling Price - Book Value
Profit/Loss = Rs. 1000 - Rs. 4,218.75 = Rs. -3,218.75
The negative sign indicates that the trader has incurred a loss of Rs. 3,218.75 on the sale of machinery.
Conclusion:
In conclusion, we can say that the trader has incurred a loss of Rs. 3,218.75 on the sale of machinery. Depreciation charged by the trader reduces the value of the machinery over time, and the book value of machinery decreases. In this case, the selling price is lower than the book value, leading to a loss.
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A trader purchased machinery of rs10,000 in Jan 2004 Depreciation is charged 25% diminishing balance at the end of the third year it was sold for rs 1000 profit or loss on the sale of machine?
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A trader purchased machinery of rs10,000 in Jan 2004 Depreciation is charged 25% diminishing balance at the end of the third year it was sold for rs 1000 profit or loss on the sale of machine? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about A trader purchased machinery of rs10,000 in Jan 2004 Depreciation is charged 25% diminishing balance at the end of the third year it was sold for rs 1000 profit or loss on the sale of machine? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A trader purchased machinery of rs10,000 in Jan 2004 Depreciation is charged 25% diminishing balance at the end of the third year it was sold for rs 1000 profit or loss on the sale of machine?.
A trader purchased machinery of rs10,000 in Jan 2004 Depreciation is charged 25% diminishing balance at the end of the third year it was sold for rs 1000 profit or loss on the sale of machine? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about A trader purchased machinery of rs10,000 in Jan 2004 Depreciation is charged 25% diminishing balance at the end of the third year it was sold for rs 1000 profit or loss on the sale of machine? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A trader purchased machinery of rs10,000 in Jan 2004 Depreciation is charged 25% diminishing balance at the end of the third year it was sold for rs 1000 profit or loss on the sale of machine?.
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