Depreciation- urgent

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ANOOP V.P (Querist)
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29 April 2021 Written down value of 4 machines at the beginning of the previous year 2019-20 forming part of block of assets carrying 15% rate of depreciation was Rs.6,00,000.

The following 3 machines of the same block were bought.

Machines Date of Purchase Date when put to use Cost (Rs.)
A 5.1.19 14.1.2020 50,000
B 5.4.19 15.5.19 1,00,000
C 15.5.19 31.1.2020 2,00,000

Four machines of this block (other than those which were acquired and put to use for less than 180 days) were sold for Rs.4,00,000. Calculate the depreciation for A.Y. 2020-21.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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06 July 2024 To calculate the depreciation for Assessment Year 2020-21 (AY 2020-21), we need to follow these steps based on the given information:

### Step 1: Determine Opening WDV (Written Down Value)

Given:
- WDV of 4 machines at the beginning of the previous year 2019-20 = Rs. 6,00,000

### Step 2: Calculate Depreciation for New Machines Purchased

For machines A, B, and C, depreciation will be calculated based on the date they were put to use.

#### Machine A:
- Date of Purchase: 5.1.2019
- Date of Use: 14.1.2020 (More than 180 days)
- Cost: Rs. 50,000

Depreciation for AY 2020-21:
- Depreciation Rate: 15%
- Depreciation for A: Rs. 50,000 × 15% = Rs. 7,500

#### Machine B:
- Date of Purchase: 5.4.2019
- Date of Use: 15.5.2019 (More than 180 days)
- Cost: Rs. 1,00,000

Depreciation for AY 2020-21:
- Depreciation Rate: 15%
- Depreciation for B: Rs. 1,00,000 × 15% = Rs. 15,000

#### Machine C:
- Date of Purchase: 15.5.2019
- Date of Use: 31.1.2020 (More than 180 days)
- Cost: Rs. 2,00,000

Depreciation for AY 2020-21:
- Depreciation Rate: 15%
- Depreciation for C: Rs. 2,00,000 × 15% = Rs. 30,000

### Step 3: Calculate Depreciation for Sold Machines

Four machines were sold for Rs. 4,00,000. Since their sale proceeds exceed their WDV, we need to calculate the depreciation on these machines till the date of sale.

Given that the WDV at the beginning of the previous year (2019-20) was Rs. 6,00,000, and four machines were sold, the depreciation for these machines needs to be calculated proportionately for the period they were held till the sale date.

### Step 4: Net Depreciation Calculation

- Add up the depreciation for new machines A, B, and C.
- Deduct the depreciation for the sold machines from the WDV at the beginning of the year.

Let's summarize the calculations:
- Opening WDV (1.4.2019): Rs. 6,00,000
- Add: Depreciation for Machines A, B, and C
- A: Rs. 7,500
- B: Rs. 15,000
- C: Rs. 30,000
- Total for new machines: Rs. 52,500

- Total WDV for calculation: Rs. 6,52,500

- Deduct: Depreciation for sold machines (proportionately calculated based on their holding period and WDV till the sale date).

This would give you the net WDV at the end of the year, and subsequently, the depreciation amount for AY 2020-21 can be computed.

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