A car costing ₹8,00,000 has scrap value of ₹3,00,000. If the book value of car at the end of fourth year is ₹6,00,000, then the useful life of the car is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) - 10 years
$\text{Cost} = 800000,\;\; \text{Scrap} = 300000$
$\text{Book value after 4 years} = 600000$
$\text{Annual depreciation} = \frac{800000 - 600000}{4} = \frac{200000}{4} = 50000$
$\text{Total depreciation} = 800000 - 300000 = 500000$
$\text{Useful life} = \frac{500000}{50000} = 10 \text{ years}$
The useful life of the car is $10$ years.