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Financial Management
IN illustration 48 ,HMR LTD Here we considered incremental depreciation On what base value, depreciation is calculated for old machine and new machine I need to know the base value seperately for each machine. Here we actually calculated on 4.5l-1l =3.5l on which we calculated incremental depreciation This is understandable. When it comes to Illustration 43,shiv limited We are not at all considered the old machine depreciation while calculating CFAT. KINDLY SOLVE MY ISSUE AS EARLY AS POSSIBLE I ALREADY LISTEN TO THE LECTURE BUT I AM GETTING A CONFUSION AND NOT GETTING FINAL CONCLUSION. Video Details ------------- Financial Management Investment Decisions #124. Illustration 48 - Q5 RTP Nov 21*
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Thankyou sir, But as you said that since the old machine has been fully depreciated and hence incremental depreciation is considered only for the new machine in case of SHIV LTD I.e (60lakhs-2.5lakhs)/5 I.e on purchase value only we are depreciating That means exclusively on the purchase machine only depreciation is there and it is incremental depreciation. Similarly the same will be applicable in the case of HMR LTD illustration 43 I.e (4.5 lakhs @7.5 % under WDV method) But we considered (4.5-1)lakhs *7.5% I.e on (purchase value - sale value of the old machine) My view is that here incremental depreciation is influenced by the sale value of the old machine. That means we are depreciating on the amount after reducing the sale value from the actual price we purchased. This is the same thing why we are not considered in the Shiv limited problem Kindly resolve the same Thank you
Thread Starter
Gopichand AnnamadasuThankyou sir, But as you said that since the old machine has been fully depreciated and hence incremental depreciation is considered only for the new machine in case of SHIV LTD I.e (60lakhs-2.5lakhs)/5 I.e on purchase value only we are depreciating That means exclusively on the purchase machine only depreciation is there and it is incremental depreciation. Similarly the same will be applicable in the case of HMR LTD illustration 43 I.e (4.5 lakhs @7.5 % under WDV method) But we considered (4.5-1)lakhs *7.5% I.e on (purchase value - sale value of the old machine) My view is that here incremental depreciation is influenced by the sale value of the old machine. That means we are depreciating on the amount after reducing the sale value from the actual price we purchased. This is the same thing why we are not considered in the Shiv limited problem Kindly resolve the same Thank you
In Q 43 Shiv we have considered depreciation on 60 lacs - 2.5 Lacs purely from tax perspective In Q 48 HMR also we have considered depreciation on Rs. 4.5 lacs - 1 lacs = 3.5 lacs ; dep = 3.5 lacs x 7.5% for year 1 = Rs.26250 We have treated dep in same manner in both places
Thread Starter
Gopichand AnnamadasuThank you sir Sorry for again asking the same doubt since it is not clarified.
Understood Your question now - regret the inconvenience - will get back shortly
Sriram Somayajula Admin
Understood Your question now - regret the inconvenience - will get back shortly
We should reduce the value derived on sale of old asset in both cases - will get the solution corrected in Q 43
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