If a car was bought for Rs. 11,00,000 and after use, was sold in scrap for Rs. 2,00,000. The number of useful years if the annual depreciation using straight line method was Rs. 75,000, is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 12 years
By the straight line method:
\(\displaystyle \text{Annual depreciation} = \frac{\text{Cost}-\text{Scrap value}}{\text{Useful life}}\)
So
\(\displaystyle \text{Useful life} = \frac{11{,}00{,}000-2{,}00{,}000}{75{,}000}\)
\(\displaystyle = \frac{9{,}00{,}000}{75{,}000} = 12\) years