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CAPITAL EXPENDITURE PLANNING & CONTROL

Sample Problems in Depreciation Computations Problem 1 X Limited has the following assets with the relevant depreciation rates Asset Id Asset Value as on Depreciation Id 1/Apr/yy Rate Motor Car A 60,000 15% Motor Taxi B 80,000 30% Motor Bus C 100,000 30% Motor Cars D 50,000 15% Motor Taxis E 150,000 30% Motor Buses F 90,000 30% During the financial year Motor Car A was sold for Rs. 70,000/Motor Taxi G was purchased on 15/08/yy for Rs. 120,000 Motor Bus F was sold for Rs. 60,000 Motor Car H was purchased on 15/11/yy for 110,000 Required y Group the assets into Block of Assets and compute the depreciation. y What would be treatment if the Motor Car A was sold for Rs. 120,000? Problem 2 Y Limited has two Lorries (A & B) at the beginning of the financial year 20YY. All vehicles can be depreciated @ 30% annually. The details relating to his assets are Date 01/Apr/YY 01/Apr/YY 10/12//YY 28/Mar/YY+1 Trx. Type Opening Balance Opening Balance Purchases Sale Vehicle Id Lorry A Lorry B Lorry C Lorry A Value 700,000 500,000 10,00,000 800,000

Determine the amount of depreciation for the Assessment Year 20YY 20YY+1 What if Lorry C is sold for 800,000 on 28/Mar/20YY+1 instead of Lorry A?

Problem 3 X Limited transfers plant & machinery used in its business for several years to Y Ltd. For 20 lakhs. The WDV of the transfer is Rs. 5 lakhs. The market value on the data of the transfer is Rs. 4 lakhs. What is the actual cost to Y Ltd? How will X Ltd be assessed for this transaction?

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CAPITAL EXPENDITURE PLANNING & CONTROL


Problem 4 On 15/Apr/YY X Ltd acquired and added to a block of assets machinery worth Rs.2 lakhs (200,000). It claimed depreciation @ 10%. On 01/Apr/YY+1, the asset was sold to Y Ltd for Rs. 2 lakhs. On 16/Sep/YY+1, the same asset was reacquired for Rs. 200,000. What is the cost to the ultimate transferee? Problem 5 Tamlnadu Power Gen Ltd is in the business of generating power. It sells its entire output to the Government and claims the straight line method (SLM) of depreciation. A diesel power unit was acquired for Rs. 60 lakhs and depreciation @ 8.24% on SLM was claimed for two years. Examine the treatment under the tax laws if y The plant is sold for Rs. 48 lakhs y The plant is sold for Rs. 55 lakhs y The plant is sold for 65 lakhs Problem 6 A company manufacturing automobile components has plant & machinery eligible for 15% depreciation of a WDV basis. It has an opening WDV of Rs. 10.00 crores as on 1st April 2009 with additions during the year of Rs. 2.00 crores. Of the additions, Rs. 1.50 crores was incurred in December 2009. Compute the eligible depreciation for the relevant assessment year for the financial year ending on 31st March 2010. Problem 7 Transactions relating to assets for a non-manufacturing company are given in Schedule 1. Compute depreciation and /or capital gains tax if the capital gains tax is 15% with 3% Education Cess. Block Category of Assets Dep. WDV as Value of Assets Value Of Assets Rate on Added in PY Sold 1/Apr/2009 2009-10 < 180 >= 180 Days Days A Residential 5% 400,000 0 100,000 0 Buildings B Factory & Admin. 10% 1,250,000 250,000 0 0 Bld. C Furniture 10% 200,000 0 75,000 0 D Motor Car 15% 300,000 50,000 0 310,000 E Plant & Machinery 15% 400,000 0 220,000 750,000 TOTAL 2,550,000 300,000 395,000 1,060,000 In addition to these transactions, you find that by the end of the financial year, Block D has been disposed and does not exist as on 31/Mar/2010. The cost of disposal amounted to RS 15,000. Block E has assets remaining but RS. 20,000 was incurred as transfer expenses. Compute depreciation or capital gains or capital loss if any.

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