27th June 2015
ABC Limited purchased a machine for Rs.1.00 lac. The machine is in use for the past eleven years. The company was using the machine on doubt shift basis. Depreciation was charged @ 7.42% by adopting Straight Line Method. The carrying amount as on 1st April 2014 is Rs.18380/- (refer working below). Residual value to be retained is Rs.919/- (5% of carrying amount of Rs.18380). Balance amount available for depreciation is Rs.17461 (18380 minus 919).
|
1 |
100000 |
7420 |
92580 |
|
2 |
92580 |
7420 |
85160 |
|
3 |
85160 |
7420 |
77740 |
|
4 |
77740 |
7420 |
70320 |
|
5 |
70320 |
7420 |
62900 |
|
6 |
62900 |
7420 |
55480 |
|
7 |
55480 |
7420 |
48060 |
|
8 |
48060 |
7420 |
40640 |
|
9 |
40640 |
7420 |
33220 |
|
10 |
33220 |
7420 |
25800 |
|
11 |
25800 |
7420 |
18380 |
Under the Companies Act 2013, the useful life of a machine would be ten years if the machine is used on double shift basis. This is because the company can claim 50% additional depreciation for using the machine on double shift basis. If used on single shift basis then the useful life of the machine would be fifteen years.
My query is what is the amount to be charged as depreciation for year ended 31st March 2015. Options are given below:
Year |
Option 1(the asset will be depreciated over the balance period of three years which is within the 15 years allowed under the New Act |
Option 2(since the asset is being used on double shift basis and since it has already crossed 10 years the balance amount will be charged during 2014-15 |
|
31.03.2015 |
5820 |
17461 |
|
31.03.2016 |
5820 |
--- |
|
31.03.2017 |
5821 |
--- |
|
Total |
17461 |
17461 |
Which is the correct method / option to be applied during year ended 31st March 2015.
With regards
Muralidharan
CAclubindia
