Jain Bros acquires a machine on 1st July 2018 at the cost of 14 lacs a...
Depreciation Calculation for Jain Bros Machine
Original Cost: Rs. 14,00,000
Installation Cost: Rs. 1,00,000
Total Cost: Rs. 15,00,000
Depreciation Rate: 10% per annum
Depreciation for the Year 2018:
- Machine is acquired on 1st July 2018, so it is used for only 6 months in the year.
- Depreciation for 6 months = (10% * Rs. 14,00,000) * (6/12) = Rs. 70,000
- Depreciation for installation cost for 6 months = (10% * Rs. 1,00,000) * (6/12) = Rs. 5,000
- Total Depreciation for the Year 2018 = Rs. 75,000
Depreciation for the Year 2019:
- Depreciation for the year = 10% * Rs. 14,00,000 = Rs. 1,40,000
- Depreciation for installation cost for the year = 10% * Rs. 1,00,000 = Rs. 10,000
- Total Depreciation for the Year 2019 = Rs. 1,50,000
Depreciation for the Year 2020:
- Depreciation for the year = 10% * Rs. 14,00,000 = Rs. 1,40,000
- Depreciation for installation cost for the year = 10% * Rs. 1,00,000 = Rs. 10,000
- Total Depreciation for the Year 2020 = Rs. 1,50,000
Closing the Books:
- The books are closed at 31st December every year.
- So, the depreciation for the year is calculated till 31st December.
- The remaining value of the machine after depreciation is subtracted from the original cost and is shown in the books as the net book value.