PRC-1 · Chapter 6 · Question 16 of 100
An entity purchases equipment for Rs. 120,000 on 1 September. The financial year ends on 31 December. If the straight-line depreciation rate is 10% per annum, what is the depreciation charge for the first year?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Rs. 4,000
Explanation
Annual depreciation = 120,000 x 10% = 12,000. The asset was held for 4 months (Sept, Oct, Nov, Dec). Pro-rated depreciation = 12,000 x (4/12) = Rs. 4,000.
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