CA Inter P1 · Chapter 3 · Question 5 of 16
Case: A machine costing ₹10,00,000 was being depreciated on the straight-line method over 10 years with nil residual value. At the start of year 5, management reassesses the remaining useful life as 4 years (instead of 6). The depreciation for year 5 under AS 10 is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) ₹1,50,000
Explanation
A revision of useful life is a change in accounting estimate and is applied prospectively. Carrying amount at the start of year 5 = 10,00,000 - (4 x 1,00,000) = 6,00,000. Depreciation for year 5 = 6,00,000 / 4 = ₹1,50,000. Charging 2,50,000 would wrongly include a catch-up for earlier years.
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