Advanced AccountingQuestion 5268 of 305
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2. What will be the amount of depreciation to be charged on the Machine for the year ended 31st March, 2022?

Options

A` 4,87,500
B` 6,37,500
C` 4,50,000
D` 5,37,500
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Correct Answer

✅ Option A — ` 4,87,500

All Options:

  • A` 4,87,500 ✓
  • B` 6,37,500
  • C` 4,50,000
  • D` 5,37,500

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Detailed Solution & Explanation

To find the depreciation to be charged for the year ended 31st March, 2022:
1. On 1st April, 2021, due to non-fulfillment of conditions, the company refunded the entire grant of ‘ 15,00,000\displaystyle `\,15,00,000.
2. Under AS 12, when a grant is refunded, it is added to the carrying amount of the asset. The revised carrying amount is:
Revised Carrying Amount=‘ 29,00,000+‘ 15,00,000=‘ 44,00,000\text{Revised Carrying Amount} = `\,29,00,000 + `\,15,00,000 = `\,44,00,0003. Remaining useful life of the Machine: 10−2=8\displaystyle 10 - 2 = 8 years.
4. Revised annual depreciation with estimated residual value of ‘ 5,00,000\displaystyle `\,5,00,000:
Revised Depreciation=‘ 44,00,000−‘ 5,00,0008=‘ 4,87,500\text{Revised Depreciation} = \frac{`\,44,00,000 - `\,5,00,000}{8} = `\,4,87,500
Hence, **Option A** is the correct answer.

Key Concepts to Understand

Depreciation

Allocation of the cost of a tangible fixed asset over its useful life due to wear and tear, efflux of time, or obsolescence.

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