Solve the problem

AS 2284 views 6 replies

rakesh kumar verma

IPCC

75 Points Joined July 2009

Please solve this question according AS-6

A machine of cost 1,20,000 is depreciated straight-line assuming 10 year working life and zero

Residual value for three years. The estimate of remaining useful life after third year was reassessed at 5 years.

Also clear the concept highlited by yellow color .

Replies (6)

Janbaz Shaikh

Praticing

40 Points Joined December 2010

Depreciation 1st year 12000 2nd year 12000 3rd year 12000 4th year 16800 5th year16800 6th year 16800 7th year 16800 8th year 16800 ---------- 120000

Guest

Rakesh,

it should be read as, "a machine of cost 120000/ is depreciated straightline for 3 years, assuming 10 yrs working life. It has zero residual value."

guess its clear.

rakesh kumar verma

IPCC

75 Points Joined July 2009

Thanks to all of you .....

Guest

Hi Rakesh

First split the question as

1.In the standpoint of 1st year Machine cost is Rs.1,20,000/- and the depreciation provided as straightline for Rs.12000/- each for 10 years.

2.In the standponit of 3rd year the useful period of assets are revised as 5 more years only (Totally 8 years) and Zero residual value.Hence balance unprovided depreciation of Rs.84000/- (1,20,000-12000-12000-12000), we have to provided in next 5 years as Rs.16,800/- (84000/5)

Mukund

CA Final (New) Group One Cleared

177 Points Joined January 2009

As per para 11 of AS - 6, If the Original estimated useful life undergoes any change, the unamortised depreciation should be charged to revenue over revised useful life. Therefore, For years 1, 2 and 3, depreciation would be s. 12000/- pa. For the rest five years depreciation would be Rs. 16,800/- pa.

satish kumar Chauhan

accountant

365 Points Joined May 2011

depreciation should be charged to revenue over revised useful life. Therefore, For years 1, 2 and 3, depreciation would be s. 12000/- pa. For the rest five years depreciation would be Rs. 16,800/- pa.