An asset costing Rs. 2,00,000 is expected to have a useful life of 10 years and a final scrap value of Rs. 40,000. The book value of the machine at the end of sixth year is:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 1,04,000
Under the linear (straight-line) method, the depreciation is the same every year:
\( \displaystyle \text{annual depreciation} = \frac{\text{cost} - \text{scrap value}}{\text{useful life}} \)
\( \displaystyle = \frac{200000 - 40000}{10} = 16000 \)
Depreciation for 6 years:
\(6 \times 16000 = 96000\)
Book value at the end of the sixth year:
\(200000 - 96000 = 104000\)
So the book value is Rs. 1,04,000.