A motor van was bought for Rs20,000 on 1 September 2005 with a residual value of

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A motor van was bought for Rs20,000 on 1 September 2005 with a residual value of Rs2,000. Depreciation was charged at 20% by the reducing balance method on yearly basis. It was sold for Rs18,000 after three years of use on 30 September 2008. Compute the profit on sale of asset.

Options:

A . Rs 7760

B . Rs 8784

C . Rs 5201

D . Rs 990

Answer: Option B
:
B
Year
Value
Depreciation
WDV
2005-2006
18000
3600
14400
2006-2007
14400
2880
11520
2007-2008
11520
2304
9216
Profit = Rs 18000-9216= Rs 8784

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