1. Wildcat Ltd, a manufacturing company sold a machinery for Rs 8 lacs at the year end.

The
company had purchased the machinery four years back for Rs 15 lacs and had depreciated the
same using written down value method of depreciation @ 20%. As an accounts executive of
Wildcat Ltd, calculate the WDV of the asset for the four years, accumulated depreciation for
four years and profit/loss on sale, if any.?

ANSWER:- Written Down Value method is a depreciation technique that applies a constant
rate of depreciation to the net book value of assets each year thereby recognizing
more depreciation expense in early years of the life of the asset and less depreciation in the
later years of the life of the asset.

WILDCAT LTD WHO IS A MANUFACTURER HAD BOUGHT THE MACHIENEY FOR 15 LACKS

 DEPRICIATION FOR 1 YEAR IS I.E. FOR WRITTEN DOWN VALUE METHOD @20% IS:-

W.D.V = VALUE OF MACHIENERY X % OF DEPRICIATION

W.D.V = 15,00,000 X 20%

=3,00,000 SO DEPRICIATION FOR 1ST YEAR IS 3 LACKS

SO VALUE OF MACHINERY FOR 1ST YEAR IS =15LACK – 3 LACK = 12 LACK

 DEPRICIATION FOR 2 YEAR FOR WRITTEN DOWN VALUE METHOD FOR MACHINERY WORTH
12 LACK @20% IS:-

W.D.V = 12,00,000 X 20%

=240000 DEPRICIATION FOR 2ND YEAR = 2.4 LACKS

SO VALUE OF MACHIENE AFTER 2ND YEAR =12,00,000 – 240000

=9,60,000

 DEPRICIATION FOR 3RD YEAR FOR WRITTEN DOWN VALUE METHOD FOR MACHINERY
WORTH 9,60,000 @20% IS:-

W.D.V = 9,60,000 X 20%

= 1,92,000 DEPRICIAITION FOR 3RD YEAR IS 1.92 LACK

SO VALUE OF MACHIENE AFTER 3RD YEAR = 9,60,000 – 1,92,000

=7,68,000

SO VALUE OF MACHIENE AFTER 3RD YEAR IS 7,68,000

  DEPRICIATION FOR 4TH YEAR FOR WRITTEN DOWN VALUE METHOD FOR MACHINERY
WORTH 7,68,000 @20% IS :-

W.D.V = 7,68,000 X 20%

= 1,53,600

SO VALUE OF MACHIENE AFTER 4TH YEAR = 768000-153600

= 6,14,400

SO VALUE OF MACHIENERY AFTER 4 YEARS IS = 6,14,400

** SALE OF MACHINERY AFTER 4 YEARS IS 8 LACKS (8,00,000)

BUT VALUE OF MACHIENERY AFTER 4 YEARS OF DEPRICIATION IS 6,14,400

SO PROFIT/LOSS AFTER SALE OF MACHINERY AFTER 4 YEARS IS

= SALE PRICE – VALUE OF MACHIENERY AFTER 4 YEARS

=8,00,000 - 6,14,400

=1,85,600 (PROFIT)

SO PROFIT AFTER SALE OF THE MACHINERY IS 1,85,600.

** ACCUMULATED DEPRICIATION = DEPRICIATION OF ( 1 YEAR+2 YEAR+3 YEAR+4 YEAR )

=3,00,000 + 2,40,000 + 1,92,000 + 1,53,600

=8,85,600 ANSWER