Depreciation Problems (SLM & WDV)
Let's solve complete problems using both methods!
Problem 1: Compare SLM vs WDV
Given:
- Machine purchased: 1st April 2020 for ₹2,00,000
- Scrap value: ₹20,000
- Useful life: 5 years
- Calculate depreciation for 3 years using both methods
Solution A: SLM
Annual Depreciation = (₹2,00,000 - ₹20,000) ÷ 5 = ₹36,000
| Year | Opening | Depreciation | Closing |
|---|---|---|---|
| 2020-21 | 2,00,000 | 36,000 | 1,64,000 |
| 2021-22 | 1,64,000 | 36,000 | 1,28,000 |
| 2022-23 | 1,28,000 | 36,000 | 92,000 |
Solution B: WDV (20% p.a.)
Rate = (1 - (Scrap/Cost)^(1/Life)) × 100
(For exam, rate usually given)
Assuming 20% rate:
| Year | Opening | Depreciation (20%) | Closing |
|---|---|---|---|
| 2020-21 | 2,00,000 | 40,000 | 1,60,000 |
| 2021-22 | 1,60,000 | 32,000 | 1,28,000 |
| 2022-23 | 1,28,000 | 25,600 | 1,02,400 |
Problem 2: Mid-Year Purchase
Given:
- Furniture purchased: 1st October 2023 for ₹60,000
- Depreciation: 10% p.a. (SLM)
- Financial year: April to March
- Calculate depreciation for 2023-24
Solution:
Full year depreciation = ₹60,000 × 10% = ₹6,000
But used only 6 months (Oct to March)
Depreciation for 2023-24 = ₹6,000 × (6/12) = ₹3,000
Problem 3: Addition During Year
Given:
- Machine on 1st April 2023: ₹1,00,000
- New machine purchased 1st October 2023: ₹50,000
- Depreciation: 15% p.a. (WDV)
- Calculate total depreciation for 2023-24
Solution:
Old Machine:
- Full year: ₹1,00,000 × 15% = ₹15,000
New Machine:
- 6 months: ₹50,000 × 15% × (6/12) = ₹3,750
Total Depreciation = ₹15,000 + ₹3,750 = ₹18,750
Problem 4: Sale of Asset
Given:
- Vehicle purchased: 1st April 2020 for ₹5,00,000
- Depreciation: 20% p.a. (WDV)
- Sold on: 1st October 2023 for ₹2,50,000
- Calculate profit/loss on sale
Solution:
Year 2020-21:
- Depreciation: ₹5,00,000 × 20% = ₹1,00,000
- Closing: ₹4,00,000
Year 2021-22:
- Depreciation: ₹4,00,000 × 20% = ₹80,000
- Closing: ₹3,20,000
Year 2022-23:
- Depreciation: ₹3,20,000 × 20% = ₹64,000
- Closing: ₹2,56,000
Year 2023-24 (6 months):
- Depreciation: ₹2,56,000 × 20% × (6/12) = ₹25,600
- Book Value at sale: ₹2,56,000 - ₹25,600 = ₹2,30,400
Sale Price: ₹2,50,000
Book Value: ₹2,30,400
Profit on Sale: ₹2,50,000 - ₹2,30,400 = ₹19,600 ✅
Quick Tips for Exams
- Check financial year: April to March (usually)
- Pro-rata depreciation: For part of year
- WDV: Depreciation on reducing balance
- SLM: Depreciation on original cost minus scrap
- Show working: Even if answer wrong, get method marks!
Quiz
Test Your Knowledge
Question 1 of 3
1. Asset bought mid-year, depreciation will be:
💡 Final Wisdom: "Practice makes perfect! Solve 10 depreciation problems, and you'll never fear them in exams. Remember: Show your working, marks guaranteed!"