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
Given: Scrap value = 22,500, Depreciation per year = 8,500, Number of years = 15
Original cost (C) using linear depreciation method:
$C = \text{Scrap value} + (\text{Depreciation per year} \times \text{Number of years})$
$C = 22,500 + (8,500 * 15) = 22,500 + 127,500 = 1,50,000$
Original cost of the motorcycle = Rs. 1,50,000