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
Under the linear (straight-line) method, the same amount is written off every year:
\( \displaystyle \text{Annual depreciation} = \frac{\text{Cost} - \text{Scrap value}}{\text{Useful life}} \)
\( \displaystyle 12500 = \frac{125000 - 25000}{n} \)
\( \displaystyle n = \frac{100000}{12500} = 8 \text{ years} \)