A sofa set costing Rs. 36000 has a useful life of 10 years. If the annual depreciation is Rs. 3000, then the scrap value by linear method is:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 6000
In the linear (straight line) method the same depreciation is charged every year:
\( \displaystyle \text{Annual depreciation} = \frac{\text{Cost} - \text{Scrap value}}{\text{Useful life}} \)
\( \displaystyle 3000 = \frac{36000 - S}{10} \)
\(36000 - S = 30000\)
\(S = 6000\)
So the scrap value is Rs. 6000.