Vishal purchased a machine costing Rs. 50,000. The estimated useful life of the machine is 10 years with a scrap value of Rs. 5,000. The annual depreciation using linear method is,
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 4,500
In the linear (straight-line) method, the loss in value (cost − scrap value) is spread equally over the useful life.
\( \displaystyle \text{Annual depreciation}=\frac{\text{Cost}-\text{Scrap value}}{\text{Useful life}} \)
\( \displaystyle =\frac{50000-5000}{10} \)
\( \displaystyle =\frac{45000}{10} \)
\( =\text{Rs. }4,500 \)