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A machine purchased on 1st April 2010 for Rs. 10,000 is showing a balance of Rs. 6,000 as on 1st April 2012 when depreciation is charged on S.L.M. basis. Now, company wants to switch over to W.D.V method by charging depreciation @ 20%. The amount of excess/ short depreciation of last two years will be?
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A machine purchased on 1st April 2010 for Rs. 10,000 is showing a bala...
Calculation of Excess/ Short Depreciation on Switching over to W.D.V Method
Background Information
- Purchase of machine on 1st April 2010 - Rs. 10,000
- Balance of machine as on 1st April 2012 - Rs. 6,000
- Depreciation charged on S.L.M. basis
- Company wants to switch over to W.D.V method
- Depreciation rate under W.D.V method - 20%
Calculation of Depreciation for Last Two Years on S.L.M. Method
Depreciation rate under S.L.M. method = (Cost of Machine - Residual Value) / Useful Life
Useful Life = 2 years
Residual Value = 0
Depreciation charged for the first two years = (10,000 - 0) / 2 = 5,000 per year
Total Depreciation charged for two years = 5,000 x 2 = 10,000
Calculation of Balance as on 1st April 2012 on S.L.M. Method
Balance of Machine as on 1st April 2012 = Cost of Machine - Depreciation charged till 1st April 2012
= 10,000 - 10,000 = 0
Calculation of Depreciation for Last Two Years on W.D.V. Method
Depreciation Rate under W.D.V. method = 20%
Depreciation charged for the first year on W.D.V. method = 10,000 x 20% = 2,000
Written down value of machine after first year = Cost of Machine - Depreciation charged for the first year = 10,000 - 2,000 = 8,000
Depreciation charged for the second year on W.D.V. method = 8,000 x 20% = 1,600
Total Depreciation charged for two years on W.D.V. method = 2,000 + 1,600 = 3,600
Calculation of Excess/ Short Depreciation on Switching over to W.D.V. Method
Depreciation charged on S.L.M. Method = 10,000
Depreciation charged on W.D.V. Method = 3,600
Excess/ Short Depreciation = Depreciation charged on S.L.M. Method - Depreciation charged on W.D.V. Method
= 10,000 - 3,600 = 6,400
Therefore, the amount of excess/ short depreciation of last two years will be Rs. 6,400. The excess/ short depreciation occurs because the depreciation charged on different methods is different. When switching over from one method to another, the excess/ short depreciation is calculated and adjusted in the books of accounts. In this case, the excess depreciation of Rs. 6,400 will be added to the W.D.V. method in the first year.
Community Answer
A machine purchased on 1st April 2010 for Rs. 10,000 is showing a bala...
Depreciation charging through SLM during last 2 years= 2000x2 = 4000
depreciation charging through WDV for last 2 years = 2000+ 1600=3600
excess of depreciation of last 2 years= 400
depreciation charging through WDV for last 2 years = 2000+ 1600=3600
excess of depreciation of last 2 years= 400
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A machine purchased on 1st April 2010 for Rs. 10,000 is showing a balance of Rs. 6,000 as on 1st April 2012 when depreciation is charged on S.L.M. basis. Now, company wants to switch over to W.D.V method by charging depreciation @ 20%. The amount of excess/ short depreciation of last two years will be?
Question Description
A machine purchased on 1st April 2010 for Rs. 10,000 is showing a balance of Rs. 6,000 as on 1st April 2012 when depreciation is charged on S.L.M. basis. Now, company wants to switch over to W.D.V method by charging depreciation @ 20%. The amount of excess/ short depreciation of last two years will be? 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 machine purchased on 1st April 2010 for Rs. 10,000 is showing a balance of Rs. 6,000 as on 1st April 2012 when depreciation is charged on S.L.M. basis. Now, company wants to switch over to W.D.V method by charging depreciation @ 20%. The amount of excess/ short depreciation of last two years will be? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A machine purchased on 1st April 2010 for Rs. 10,000 is showing a balance of Rs. 6,000 as on 1st April 2012 when depreciation is charged on S.L.M. basis. Now, company wants to switch over to W.D.V method by charging depreciation @ 20%. The amount of excess/ short depreciation of last two years will be?.
A machine purchased on 1st April 2010 for Rs. 10,000 is showing a balance of Rs. 6,000 as on 1st April 2012 when depreciation is charged on S.L.M. basis. Now, company wants to switch over to W.D.V method by charging depreciation @ 20%. The amount of excess/ short depreciation of last two years will be? 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 machine purchased on 1st April 2010 for Rs. 10,000 is showing a balance of Rs. 6,000 as on 1st April 2012 when depreciation is charged on S.L.M. basis. Now, company wants to switch over to W.D.V method by charging depreciation @ 20%. The amount of excess/ short depreciation of last two years will be? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A machine purchased on 1st April 2010 for Rs. 10,000 is showing a balance of Rs. 6,000 as on 1st April 2012 when depreciation is charged on S.L.M. basis. Now, company wants to switch over to W.D.V method by charging depreciation @ 20%. The amount of excess/ short depreciation of last two years will be?.
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