Pondicherry roadways ltd. Which depreciates its machinery at 10% p.a. On written down value desires to change the basis to straight line method, the rate remaining the same. The decision is taken on 31st december 2005 to be effective from 1st january 2003.
On 1st january 2005, the balance in the machinery account is rs.29,16,000. On 1st july 2005, a part of machinery purchased on 1st january 2003 for rs.2,40,000 was sold for rs.1,35,000. On the same day a new machine is purchased for rs.4,50,000 and installed at a cost of rs.24,000. Analyze the above case and answer the following questions:
(i) What was the loss incurred on the machine sold?
(ii) What was the book value of unsold machinery on 1-1-2003.
(iii) What would be the additional depreciation due to change in method?
(iv) What should be the depreciation to be charged for 2005?