Heaven Ltd. had purchased a machinery on 1.4.2X01 for 30,00,000, which is reflected in its books at written down value of 17,50,000 on 1.4.2X06. The…

1. Calculation of useful life of machinery on 1.4.2X01 Depreciation charge in 5 years = (₹ 30,00,000 - 17,50,000) = 12,50,000 Depreciation per year as per Straight Line method = 12,50,000/5 years = 2,50,000 Remaining useful life = 17,50,000 /2,50,000 = 7 years Total useful life = 5 years + 7 years = 12 years 2. Depreciation after upward revaluation as on 1.4.2X06 Particulars ₹ Book value as on 1.4.2X06 17,50,000 Add: 10% upward revaluation 1,75,000 Revalued amount 19,25,000 Remaining useful life 7 years (Refer W.N.1) Depreciation on revalued amount = 19,25,000 / 7 years = 2,75,000 lakh 3. Depreciation after downward revaluation as on 1.4.2X08 Particulars ₹ Book value as on 1.4.2X08 13,75,000 Less: 15% Downward revaluation (2,06,250) Revalued amount 11,68,750 Revised useful life 8 years Depreciation on revalued amount = 11,68,750 / 8 years = 1,46,094 4. Amount transferred from revaluation reserve Revaluation reserve on 1.4.2X06 (A) 1,75,000 Remaining useful life 7 years Amount transferred every year (1,75,000 / 7) 25,000 Amount transferred in 2 years (25,000 x 2) (B) 50,000 Balance of revaluation reserve on 1.4.2X08 (A-B) 1,25,000 5. Amount of downward revaluation to be charged to Profit and Loss Account Downward revaluation as on 1.4.2X08 (W.N.3) 2,06,250 Less: Adjusted from Revaluation reserve (W.N.4) (₹ 1,25,000) Amount transferred to Profit and Loss Account 81,250