An asset costing ₹20,000 is expected to have a useful life of 5 years and a final scrap value of ₹5000. Then the annual depreciation charge using linear method of depreciation is:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → ₹ 3,000
$\text{Annual depreciation} = \frac{\text{Cost} - \text{Scrap value}}{\text{Life}}$
$= \frac{20000 - 5000}{5}$
$= \frac{15000}{5} = 3000$
The annual depreciation charge is ₹3000.