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The balance of machine on 31st March 2016 is Rs. 72,900 (after c harging depreciation of the year).  The machine was purchased on 1st April 2013 charging depreciation @ 10% p.a. by diminishing balance method. The cost price of the machine as on 1st April 2013 would be
  • a)
    Rs. 1,00,000
  • b)
    Rs. 90,000
  • c)
    Rs. 81,000
  • d)
    Rs. 72,900
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
The balance of machine on 31st March 2016 is Rs. 72,900 (after c hargi...
Calculation of Cost Price of Machine

Given:
Depreciation rate = 10% p.a. by diminishing balance method
Balance as on 31st March 2016 = Rs. 72,900

Step 1: Calculation of Depreciation
Let the cost price of the machine be Rs. x
Depreciation for the first year = 10% of x = 0.1x
Depreciation for the second year = 10% of (x - 0.1x) = 0.09x
Depreciation for the third year = 10% of (x - 0.1x - 0.09x) = 0.081x

Step 2: Calculation of Book Value
Book value as on 31st March 2016 = Cost price - Depreciation for 3 years
72,900 = x - 0.271x
x = Rs. 1,00,000

Therefore, the cost price of the machine as on 1st April 2013 would be Rs. 1,00,000.
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Community Answer
The balance of machine on 31st March 2016 is Rs. 72,900 (after c hargi...
WDV = COST (1 - r)^n
WDV = 72900
72900 = cost (1 - 0.1)^3
72900 = cost (0.9)^3
cost = 72900/0.729
cost =100000
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The balance of machine on 31st March 2016 is Rs. 72,900 (after c harging depreciation of the year). The machine was purchased on 1st April 2013 charging depreciation @ 10% p.a. by diminishing balance method. The cost price of the machine as on 1st April 2013 would bea)Rs. 1,00,000b)Rs. 90,000c)Rs. 81,000d)Rs. 72,900Correct answer is option 'A'. Can you explain this answer?
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