A printing press costing Rs. 3,60,000 has a scrap value of Rs. 60,000. If the annual depreciation by the linear method is Rs. 25,000, the useful life of the press is
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 12 years
In the linear method,
\( \displaystyle D = \frac{C - S}{n} \)
so the useful life is
\( \displaystyle n = \frac{C - S}{D} \)
With C = 360000, S = 60000 and D = 25000:
\( \displaystyle n = \frac{360000 - 60000}{25000} = \frac{300000}{25000} = 12 \)
The useful life is 12 years.
Why the other options are incorrect
Option (1) 14.4 years — Incorrect. This is 360000 ÷ 25000, which forgets that the press is depreciated only down to its scrap value.
Option (2) 10 years — Incorrect. In 10 years the press loses only Rs. 2,50,000, leaving Rs. 1,10,000, not the scrap value of Rs. 60,000.
Option (4) 2.4 years — Incorrect. This is 60000 ÷ 25000, which uses the scrap value in place of the total depreciation.