A T.V. panel costing Rs 18000 has a useful life of 12 years. If the annual depreciation is Rs 1000, then its scrap value by linear method is:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 6000
Under the linear (straight line) method, the depreciation is the same every year:
\( \displaystyle \text{Annual depreciation} = \frac{\text{Cost} - \text{Scrap value}}{\text{Useful life}} \)
With S the scrap value:
\( \displaystyle 1000 = \frac{18000 - S}{12} \)
\(18000 - S = 12000\)
\(S = 6000\)
So the scrap value is Rs. 6000.