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AMA CVP Doubt CA Final Chapter 2 Group II

Page no : 2
Uday

Uday (Article Assistant) (411 Points)
Replied 18 February 2018

Here Depreciation indirectly mentions cost of asset purchased

If cost of New asset is 1L Net Incremental depreciation Benefit will be 9.65L
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Uday

Uday (Article Assistant) (411 Points)
Replied 18 February 2018

1) Tax will be charged on Profit ( After profit incurred tax will be charged )
Here our aim is to increase profit Hence tax is irrelevant
2) There r some cases where we will consider tax - Because we want to earn desired profit after Tax

Mohit Suresh

Mohit Suresh (plus twov) (310 Points)
Replied 18 February 2018

Thanks for such elaborate explanation. last query,

In second case, scrap value is 1420000

Depreciation(new-old) = 1065000-0=1065000 is incremental cost.

But in the first case, when scrap value is 0
Depreciation(new-old)=1065000-1420000=(355000) is incremental cost by equation.

So net incremental benefit of 320000. is it somehow related to you mentioning related to "old (NOT NEW)"

Thanks in advance

Uday

Uday (Article Assistant) (411 Points)
Replied 18 February 2018

Yes
Net Incremental cost of old machine means Net Incremental Benefit of New machine
Both are same

Mohit Suresh

Mohit Suresh (plus twov) (310 Points)
Replied 18 February 2018

I guess it is like 355000 loss + depreciation of 1065000 thus total 1420000 incremental cost.

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Mohit Suresh

Mohit Suresh (plus twov) (310 Points)
Replied 18 February 2018

but then cost will be then 1065000 - 355000= 710000??!!!

Mohit Suresh

Mohit Suresh (plus twov) (310 Points)
Replied 18 February 2018

ignore the reply prior to above

Uday

Uday (Article Assistant) (411 Points)
Replied 18 February 2018

pls Ignore the concept that Gross Cost of New Machine I put that in Indirect way
freshly read from Elaborations

Uday

Uday (Article Assistant) (411 Points)
Replied 18 February 2018

Take cost of New machine as 10.65L only &
compare depreciation & Scrap benefits for Both

Mohit Suresh

Mohit Suresh (plus twov) (310 Points)
Replied 18 February 2018

Thank you for you time.. appreciate it very much..
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