A bike costing ₹120000 has scrap value of ₹30000. If the book value of the bike at the end of third year is ₹90000, then the useful life of the bike is,
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → 9 years
Assuming straight line depreciation,
$D=\frac{P-S}{n}$
and,
Book value after t-years,
$v_t=P-Dt$
$90,000=1,20,000-3D$
$⇒3D=30,000$
$⇒D=10,000$
and,
$n=\frac{P-S}{D}=\frac{1,20,000-30,000}{10,000}$
$=9\, years$