A vehicle costing ₹10,50,000 has a final scrap value of ₹5,25,000. If annual depreciation charge is ₹75,000, then useful life of the vehicle is :
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 7 years
Depreciation is calculated using straight-line method (SLM),
$\text{Annual Depreciation}=\frac{\text{Cost of Asset - Scrap Value}}{\text{Useful life}}$
$⇒75,000=\frac{10,50,000-5,25,000}{\text{Useful life}}$
⇒ Useful life = $\frac{5,25,000}{75,000}=7$ years