A motorbike costing Rs. 1,25,000 has a scrap value of Rs. 25,000. If the annual depreciation charge is Rs. 12,500, then the useful life of the bike is (by using linear method):
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 8 years
Given:
Cost of motorbike: C = 1,25,000
Scrap value: S = 25,000
Annual depreciation: D = 12,500
Using the linear (straight-line) method, the useful life is:
$\text{Useful life} = \frac{C - S}{D}$
$\text{Useful life} = \frac{1,25,000 - 25,000}{12,500} = \frac{1,00,000}{12,500} = 8 \text{ years}$