The situation
A plant pays ₹24 lakh for a press, estimates ₹4 lakh residual value and a five-year life, and places it in service October 1. Use straight-line depreciation and a March 31 year-end.
Your task
Find first-year depreciation, carrying value and cash investment.
Reveal step-by-step solution
Set up the problem
Annual depreciation = (₹24 − ₹4) ÷ 5 = ₹4 lakh.
Work through the numbers
Six months of use gives ₹4 × 6 ÷ 12 = ₹2 lakh expense. Carrying value is ₹24 − ₹2 = ₹22 lakh.
Interpret the result
The equipment purchase used ₹24 lakh investing cash. The ₹2 lakh depreciation records expense without another payment.
What to remember
Separate cash payment, in-service date and depreciable base before calculating expense.