A firm has a policy of changing depreciation on Plant and Machinery @ 10% under WDV Method. If the book value of Plant and Machinery was ` 81,000 on 31.03.2013. Find the original cost of the plant if the same was purchased on 01.04.2011

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Quizplus · Accepted Answer

Under the Written Down Value (WDV) method, the depreciation is charged at a fixed percentage on the reducing balance each year. Given a depreciation rate of 10% and a final book value of `81,000 after 2 years, we can reverse-engineer the original cost. The formula for WDV is: Final Value = Initial Value * (1 - Depreciation Rate)^n, where n is the number of years. Rearranging to find the Initial Value gives us `1,00,000 as the original cost of the plant.

A Firm Has a Policy of Changing Depreciation on Plant