Question 9
Shivam Industries installed a flour mill for Rs. 300,000 five years ago. If the fixed annual rate of depreciation is 5% and they sold the mill for Rs. 250,000, their gain/loss % is?
Solution
Original Cost: Rs. 300,000
Annual Depreciation Rate: 5%
Time Period: 5 years
Depreciation per year = 5% of 300,000 = Rs. 15,000
Total Depreciation over 5 years = 15,000 * 5 = Rs. 75,000
Book Value = Original Cost - Depreciation
Book Value = 300000 - 75000 = 225000
Selling Price (SP): Rs. 250,000
Book Value (CP): Rs. 225,000
Gain = 250000 - 225000 = 25000
Gain % = (Gain/Book Value)*100 = 11.11%
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