A machine costing Rs.2,00,000 has a useful life of 5 years. The estimated scrap value is Rs.20,000. By using straight line method, the annual depreciation is
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs.36,000 **
Cost of machine = Rs. 2,00,000
Scrap value = Rs. 20,000
Useful life = 5 years
Annual depreciation (Straight Line Method):
$\text{Depreciation per year} = \frac{\text{Cost} - \text{Scrap value}}{\text{Life}}$
$= \frac{200000 - 20000}{5}$
$= \frac{180000}{5}$
$= 36000$
Annual depreciation = Rs. 36,000