A mobile phone costing Rs. 50000 has a useful life of 5 years. If the annual depreciation is Rs. 5000, then by using a linear method, its scrap value is
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Rs. 25000
In the linear (straight-line) method,
\( \displaystyle \text{Annual depreciation} = \frac{\text{Cost} - \text{Scrap value}}{\text{Useful life}} \)
\( \displaystyle 5000 = \frac{50000 - S}{5} \)
\(50000 - S = 25000\)
\(S = 25000\)
So the scrap value is Rs. 25000.