A motorcycle has a scrap value of Rs. 22,500 after 15 years of its purchase. If the annual depreciation charge is Rs. 8,500, then the original cost by linear method is:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 1,50,000
In the linear method of depreciation, the same amount is written off every year:
\( \displaystyle \text{Annual depreciation} = \frac{\text{Original cost} - \text{Scrap value}}{\text{Useful life in years}} \)
Let C be the original cost:
\( \displaystyle 8500 = \frac{C - 22500}{15} \)
\(C - 22500 = 127500\)
\(C = 150000\)
So the original cost is Rs. 1,50,000.