Question

‘X’ Ltd, purchased a machinery on 1.1.2005 for a sum of ₹40,000. It is expected to have a working life of 7 years, by the end of which it would get a scrap value of ₹5000. Prepare machinery account in the book of X Ltd. for the last 3 years by providing depreciation under Fixed Instalment Method and also prepare depreciation account for the 3 years.

Answer 1

Depreciation = \(\cfrac{\text{original cost - Scarp value}}{\text{Expected working life}}\)

= \(\cfrac{4000 - 5000}{7}\) = 5000