A mainframe computer whose cost is ₹5,00,000 will depreciate to a scrap value of ₹50,000 in 5 years. By using linear method of depreciation, the book value of the computer at the end of third year is :
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → ₹2,30,000
$\text{Annual Depreciation}=\frac{\text{Initial Cost-Scrap Value}}{\text{Useful life}}$
$=\frac{5,00,000-50,000}{5}$
$=₹90,000$
$\text{Book Value = Initial Cost - (n × Annual Depreciation)}$
$=5,00,000-2,70,000$
$=₹2,30,000$