A machine costing Rs. 1,00,000 has a useful life of 5 years. The estimated scrap value is Rs. 20,000. Using straight line method, the annual depreciation is
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 16,000
Under the straight line method, the same amount is written off every year, so that the cost comes down to the scrap value at the end of the useful life:
\( \displaystyle \text{Annual depreciation} = \frac{\text{Cost} - \text{Scrap value}}{\text{Useful life}} \)
\( \displaystyle = \frac{100000 - 20000}{5} \)
\( \displaystyle = \frac{80000}{5} = 16000 \)
So the annual depreciation is Rs. 16,000.
CBSE Applied Mathematics (Class XII):
Depreciation
