The cost of a machinery is ₹8,00,000. Its scrap value will be one tenth of its original cost in 15 years. Using linear method of depreciation, the book value of the machine at the end of 10th year will be:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → ₹3,20,000
Initial Cost of Machinery (P) = 8,00,000
Scrap Value (S) = $\frac{1}{10}$ of 8,00,000 = 80,000
Useful life (n): 15 years
Depreciation, $D=\frac{P-S}{n}$
$=\frac{8,00,000-80,000}{15}=\frac{7,20,000}{15}$
$=48,000$
∴ Book value after 10 years
$=P-(D×Years)$
$=8,00,000-(48,000×10)$
$=3,20,000$