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    Question

    A machinery with original cost of ₹ 10,00,000 and Nil

    Salvage value acquired on 1st April 2017 with 4 years useful life was depreciated using Straight Line Method. It was decided to sell the machinery on 1st October 2020 for 1,20,000. What shall be the gain or (loss) on the sale of Machinery?
    A Loss of 1,30,000 Correct Answer Incorrect Answer
    B Loss of 5,000 Correct Answer Incorrect Answer
    C Gain of 1,20,000 Correct Answer Incorrect Answer
    D Gain of 5,000 Correct Answer Incorrect Answer
    E Gain of 1,30,000 Correct Answer Incorrect Answer

    Solution

    Depreciation per year: 10,00,000/4 = 2,50,000 Machine is used for 3.5 years so till now 250,000*3.5 years = 8,75,000 depreciation has been charged. Machine on 1st Oct 2020 has a balance of 1,25,000 and is now sold for 1,20,000 which is 5000 lesser than depreciated value.

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