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Question
A boiler was purchased on 1st January 2015 from abroad for ₹ 10,000. Shipping and forwarding charges amounted to 12,000. Import duty ₹ 7,000 and expenses of installation amounted to ₹ 1,000. Calculate depreciation for the first 3 years @10% p.a. on diminishing balance method assuming that the accounts are dosed 31st December each year.
Solution
Calculate the amount of Depreciation-
Cost of the assets = Purchase price + shipping and forwarding charges + Import duty+Install – action charge.
= 10,000 + 2,000 + 7,000 + 1,000
= ₹ 20,000.
| Amount ₹ | |
| Cost of the assets on 1.1.2015 | 20,000 |
| Less: Depreciation for 2015 at 10% on 20,000 | 2,000 |
| 18,000 | |
| Less: Depreciation for 2016 at 10% on 18,000 | 1,800 |
| 16,200 | |
| Less: Depreciation for 2017 at 10% on 16,200 | 1,620 |
| 14,580 |
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