A vehicle whose cost is Rs. 7,00,000 will depreciate to a scrap value of Rs. 1,50,000 in 5 years. Using linear method of depreciation, the book value of the vehicle at the end of third year is:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 3,70,000
In the linear (straight line) method, the same amount is written off every year:
\( \displaystyle \text{annual depreciation} = \frac{\text{cost} - \text{scrap value}}{\text{useful life}} = \frac{7{,}00{,}000 - 1{,}50{,}000}{5} = 1{,}10{,}000 \)
After 3 years:
\(\text{book value} = 7{,}00{,}000 - 3 \times 1{,}10{,}000 = 7{,}00{,}000 - 3{,}30{,}000 = 3{,}70{,}000\)
Why the other options are incorrect
Option (1) Rs. 1,10,000 — Incorrect. This is the depreciation for one year, not the book value.
Option (3) Rs. 2,70,000 — Incorrect. The book value after 3 years is Rs. 3,70,000; Rs. 2,70,000 is Rs. 1,00,000 too low.
Option (4) Rs. 2,50,000 — Incorrect. The book value after 3 years is Rs. 3,70,000, not Rs. 2,50,000.
CBSE Applied Mathematics (Class XII):
Depreciation
