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A Machinery with original cost Rs. 10,00,000 and Nil Salvage value acquired on 1st April 2017 with 4 years useful life was depriciated using Straight Line Method. It was decided to sell the machinery on 1st October 2020 for Rs. 1,20,000. What shall be the gain or (loss) on the sale of Machinery?
Most Upvoted Answer
A Machinery with original cost Rs. 10,00,000 and Nil Salvage value acq...
Solution:
Given Data:
Original Cost of Machinery = Rs. 10,00,000
Salvage Value = Nil
Useful Life = 4 years
Method of Depreciation = Straight Line Method
Date of Acquisition = 1st April 2017
Date of Sale = 1st October 2020
Sale Value = Rs. 1,20,000
Calculation of Depreciation:
Depreciation per year = (Original Cost - Salvage Value) / Useful Life
= (Rs. 10,00,000 - 0) / 4 years
= Rs. 2,50,000 per year
Depreciation for the period from 1st April 2017 to 31st March 2020:
= Depreciation per year x No. of years
= Rs. 2,50,000 x 3 years
= Rs. 7,50,000
Book Value of Machinery as on 1st October 2020:
Book Value = Original Cost - Depreciation
= Rs. 10,00,000 - Rs. 7,50,000
= Rs. 2,50,000
Gain or Loss on Sale of Machinery:
If Sale Value > Book Value, then there is a gain on sale of machinery.
If Sale Value < book="" value,="" then="" there="" is="" a="" loss="" on="" sale="" of="" />
If Sale Value = Book Value, then there is neither gain nor loss on sale of machinery.
In this case, Sale Value (Rs. 1,20,000) < book="" value="" (rs.="" />
Therefore, there is a loss on sale of machinery.
Calculation of Loss on Sale of Machinery:
Loss on Sale = Book Value - Sale Value
= Rs. 2,50,000 - Rs. 1,20,000
= Rs. 1,30,000
Conclusion:
The loss on sale of machinery is Rs. 1,30,000. This means that the company has incurred a loss of Rs. 1,30,000 on the sale of machinery. It is important to note that the loss on sale of machinery is a non-operating expense and should be shown separately in the Income Statement.
Given Data:
Original Cost of Machinery = Rs. 10,00,000
Salvage Value = Nil
Useful Life = 4 years
Method of Depreciation = Straight Line Method
Date of Acquisition = 1st April 2017
Date of Sale = 1st October 2020
Sale Value = Rs. 1,20,000
Calculation of Depreciation:
Depreciation per year = (Original Cost - Salvage Value) / Useful Life
= (Rs. 10,00,000 - 0) / 4 years
= Rs. 2,50,000 per year
Depreciation for the period from 1st April 2017 to 31st March 2020:
= Depreciation per year x No. of years
= Rs. 2,50,000 x 3 years
= Rs. 7,50,000
Book Value of Machinery as on 1st October 2020:
Book Value = Original Cost - Depreciation
= Rs. 10,00,000 - Rs. 7,50,000
= Rs. 2,50,000
Gain or Loss on Sale of Machinery:
If Sale Value > Book Value, then there is a gain on sale of machinery.
If Sale Value < book="" value,="" then="" there="" is="" a="" loss="" on="" sale="" of="" />
If Sale Value = Book Value, then there is neither gain nor loss on sale of machinery.
In this case, Sale Value (Rs. 1,20,000) < book="" value="" (rs.="" />
Therefore, there is a loss on sale of machinery.
Calculation of Loss on Sale of Machinery:
Loss on Sale = Book Value - Sale Value
= Rs. 2,50,000 - Rs. 1,20,000
= Rs. 1,30,000
Conclusion:
The loss on sale of machinery is Rs. 1,30,000. This means that the company has incurred a loss of Rs. 1,30,000 on the sale of machinery. It is important to note that the loss on sale of machinery is a non-operating expense and should be shown separately in the Income Statement.
Community Answer
A Machinery with original cost Rs. 10,00,000 and Nil Salvage value acq...
5000 loss
annual dep=10,00,000/4=2,50,000
balance in machinery account as on 1.4.2020= 2,50,000
balance as on 1.10.2020 =2,50,000-1,25,000(6 months' dep)
loss = 1,25,000-1,20,000
annual dep=10,00,000/4=2,50,000
balance in machinery account as on 1.4.2020= 2,50,000
balance as on 1.10.2020 =2,50,000-1,25,000(6 months' dep)
loss = 1,25,000-1,20,000
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A Machinery with original cost Rs. 10,00,000 and Nil Salvage value acquired on 1st April 2017 with 4 years useful life was depriciated using Straight Line Method. It was decided to sell the machinery on 1st October 2020 for Rs. 1,20,000. What shall be the gain or (loss) on the sale of Machinery?
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A Machinery with original cost Rs. 10,00,000 and Nil Salvage value acquired on 1st April 2017 with 4 years useful life was depriciated using Straight Line Method. It was decided to sell the machinery on 1st October 2020 for Rs. 1,20,000. What shall be the gain or (loss) on the sale of Machinery? 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 A Machinery with original cost Rs. 10,00,000 and Nil Salvage value acquired on 1st April 2017 with 4 years useful life was depriciated using Straight Line Method. It was decided to sell the machinery on 1st October 2020 for Rs. 1,20,000. What shall be the gain or (loss) on the sale of Machinery? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A Machinery with original cost Rs. 10,00,000 and Nil Salvage value acquired on 1st April 2017 with 4 years useful life was depriciated using Straight Line Method. It was decided to sell the machinery on 1st October 2020 for Rs. 1,20,000. What shall be the gain or (loss) on the sale of Machinery?.
A Machinery with original cost Rs. 10,00,000 and Nil Salvage value acquired on 1st April 2017 with 4 years useful life was depriciated using Straight Line Method. It was decided to sell the machinery on 1st October 2020 for Rs. 1,20,000. What shall be the gain or (loss) on the sale of Machinery? 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 A Machinery with original cost Rs. 10,00,000 and Nil Salvage value acquired on 1st April 2017 with 4 years useful life was depriciated using Straight Line Method. It was decided to sell the machinery on 1st October 2020 for Rs. 1,20,000. What shall be the gain or (loss) on the sale of Machinery? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A Machinery with original cost Rs. 10,00,000 and Nil Salvage value acquired on 1st April 2017 with 4 years useful life was depriciated using Straight Line Method. It was decided to sell the machinery on 1st October 2020 for Rs. 1,20,000. What shall be the gain or (loss) on the sale of Machinery?.
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A Machinery with original cost Rs. 10,00,000 and Nil Salvage value acquired on 1st April 2017 with 4 years useful life was depriciated using Straight Line Method. It was decided to sell the machinery on 1st October 2020 for Rs. 1,20,000. What shall be the gain or (loss) on the sale of Machinery?, a detailed solution for A Machinery with original cost Rs. 10,00,000 and Nil Salvage value acquired on 1st April 2017 with 4 years useful life was depriciated using Straight Line Method. It was decided to sell the machinery on 1st October 2020 for Rs. 1,20,000. What shall be the gain or (loss) on the sale of Machinery? has been provided alongside types of A Machinery with original cost Rs. 10,00,000 and Nil Salvage value acquired on 1st April 2017 with 4 years useful life was depriciated using Straight Line Method. It was decided to sell the machinery on 1st October 2020 for Rs. 1,20,000. What shall be the gain or (loss) on the sale of Machinery? theory, EduRev gives you an
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