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Rs 10 lakh asset, 5-yr SLM, impaired to 4.5 lakh at year 2; recoverable 5 lakh at year 3. Max reversal?

ARs 2 lakh
BRs 50,000
CRs 1 lakh
DRs 1.5 lakh
Answer & Solution
Correct answer: C. Rs 1 lakh
After the write-down, year 3 depreciation is 1,50,000, leaving 3,00,000. Without a loss the carrying amount would be 4,00,000 (10,00,000 less 3 x 2,00,000), so the reversal is capped at 1,00,000.
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