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
By the straight line method, the cost minus the scrap value is spread equally over the useful life:
\( \displaystyle \text{Annual depreciation} = \frac{\text{Cost} - \text{Scrap value}}{\text{Useful life}} \)
\( \displaystyle = \frac{200000 - 20000}{5} = \frac{180000}{5} = 36000 \)
So the annual depreciation is Rs.36,000.
Why the other options are incorrect
Option (1) Rs.18,000 — Incorrect. The annual depreciation is Rs.36,000.
Option (2) Rs.25,000 — Incorrect. The annual depreciation is Rs.36,000.
Option (4) Rs.40,000 — Incorrect. This is \(\frac{200000}{5}\), which ignores the scrap value of Rs.20,000.
CBSE Applied Mathematics (Class XII):
Linear or Straight Line Method
