A machine costing Rs. 16,00,000 is expected to have a useful life of 15 years and a final scrap value of Rs. 1,00,000. Which of the following statements are correct?
A. The annual depreciation is Rs. 50,000.
B. The annual depreciation is Rs. 1,00,000.
C. The book value at the end of the sixth year is Rs. 9,00,000.
D. The book value at the end of the sixth year is Rs. 10,00,000.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → B and D only
A single “annual depreciation” means the same amount every year, i.e. the straight line method:
\( \displaystyle \text{Annual depreciation}=\frac{\text{Cost}-\text{Scrap value}}{\text{Useful life}} \)
\( \displaystyle =\frac{16{,}00{,}000-1{,}00{,}000}{15} \)
\( =1{,}00{,}000 \)
\( \text{Book value after 6 years}=16{,}00{,}000-6\times 1{,}00{,}000 \)
\( =10{,}00{,}000 \)
So the annual depreciation is Rs. 1,00,000 and the book value at the end of the sixth year is Rs. 10,00,000.
Checking the statements
(A) The annual depreciation is Rs. 50,000. — Incorrect. It is Rs. 1,00,000.
(B) The annual depreciation is Rs. 1,00,000. — Correct. Rs. 15,00,000 spread over 15 years.
(C) The book value at the end of the sixth year is Rs. 9,00,000. — Incorrect. It is Rs. 10,00,000; Rs. 9,00,000 is the book value at the end of the seventh year.
(D) The book value at the end of the sixth year is Rs. 10,00,000. — Correct. Rs. 16,00,000 less 6 × Rs. 1,00,000.
CBSE Applied Mathematics (Class XII):
Depreciation
