Question

Machinery was purchased on 1^st January 2015 for Rs. 4,00,000. Rs. 15,000 was spent on its erection and Rs. 10,000 on its freight charges. Depreciation is charged at 10% per annum on straight line method. The books are closed on 31^st March each year. Calculate the amount of depreciation on machinery for the first two years.

Answer 1

Calculation of depreciation: 

Original cost = Machinery purchased + erection charges + freight charges 

= 4,00,000 + 15,000 + 10 ,000

 = 4,25,000

First year depreciation = Rs. 10,625

Secound year depreciation = Rs. 42,500