Fixed Assets (Net): 31st December,1994 = Rs. 1,50,000 31st December, 1995 = Rs. 1,90,000 Provision for depreciation: A machine costing Rs. 70,000 (book value Rs. 40,000) was disposed for Rs. 25,000 during the year 1995 The application of funds in respect of fixed assets during the year is:

The correct answer is: C. Rs. 2,05,000

Explanation:

The application of funds in respect of fixed assets during the year is calculated as follows:

= Increase in fixed assets during the year
– Disposal of fixed assets during the year

= (190000 – 150000)
– (70000 – 40000 + 25000)

= 205000

Therefore, the application of funds in respect of fixed assets during the year is Rs. 2,05,000.

Each option is explained below:

• Option A: Rs. 1,10,000. This is the amount of depreciation charged during the year. However, this is not the application of funds. The application of funds is the amount of money spent on fixed assets during the year.
• Option B: Rs. 1,80,008. This is the sum of the increase in fixed assets during the year and the disposal of fixed assets during the year. However, this is not the application of funds. The application of funds is the amount of money spent on fixed assets during the year.
• Option C: Rs. 2,05,000. This is the correct answer. It is the amount of money spent on fixed assets during the year.
• Option D: Rs. 2,20,000. This is the sum of the increase in fixed assets during the year and the disposal of fixed assets during the year, plus the depreciation charged during the year. However, this is not the application of funds. The application of funds is the amount of money spent on fixed assets during the year.