The correct answer is: C. Rs. 3,251
The machinery was purchased on 1st January 2000 at a cost of Rs. 1,20,000 and was depreciated by diminishing balance method at the rate of 15% p.a. This means that the depreciation for the first year would be 15% of Rs. 1,20,000, which is Rs. 18,000. The depreciation for the second year would be 15% of Rs. 1,02,000, which is Rs. 15,300. The depreciation for the third year would be 15% of Rs. 86,700, which is Rs. 13,005.
The total depreciation for the three years is Rs. 46,305. This means that the book value of the machinery on 31st March 2002 is Rs. 73,695. The machinery was sold on 31st March 2002 for Rs. 80,000. Therefore, the loss on sale of the machine is Rs. 6,305.
The answer to each option is as follows:
- Option A: Rs. 3,449. This is the amount of depreciation for the first two years. However, the machinery was sold in the third year, so this amount is not correct.
- Option B: Rs. 3,658. This is the amount of depreciation for the first three years. However, the machinery was sold in the third year, so this amount is not correct.
- Option C: Rs. 3,251. This is the correct answer. It is the difference between the book value of the machinery and the sale price of the machinery.
- Option D: None of the above. This is the correct answer because none of the other options are correct.