A machine costing Rs. 50,000 has a useful life of 4 years. The estimated scrap value is Rs. 10,000. The rate of depreciation per annum is:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → 20% **
Cost price = 50,000
Scrap value = 10,000
Life = 4 years
Using straight-line depreciation:
Annual depreciation = $\displaystyle \frac{50000 - 10000}{4}$
= $\displaystyle \frac{40000}{4} = 10000$
Rate of depreciation per annum:
$\displaystyle \frac{10000}{50000}\times 100 = 20\%$
Rate of depreciation = 20% per annum