Taniya purchased a car costing Rs. 21,00,000 which has a useful life of 15 years. The estimated scrap value of the car is Rs. 3,00,000. The annual depreciation using straight line method is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 1,20,000
In the straight line method, the same amount is written off every year, and only the cost less the scrap value is depreciated.
\( \displaystyle \text{Annual depreciation}=\frac{\text{Cost}-\text{Scrap value}}{\text{Useful life}} \)
\( \displaystyle =\frac{21{,}00{,}000-3{,}00{,}000}{15} \)
\( \displaystyle =\frac{18{,}00{,}000}{15} \)
\( \displaystyle =1{,}20{,}000 \)
So the annual depreciation is Rs. 1,20,000.
Why the other options are incorrect
Option (1) Rs. 1,40,000 — Incorrect. Rs. 1,40,000 is \( \frac{21{,}00{,}000}{15} \); it ignores the scrap value, which is not depreciated.
Option (2) Rs. 1,80,000 — Incorrect. Rs. 1,80,000 would be the depreciation over a life of 10 years, not 15 years.
Option (4) Rs. 1,00,000 — Incorrect. Rs. 1,00,000 per year for 15 years writes off only Rs. 15,00,000, less than the Rs. 18,00,000 to be depreciated.
CBSE Applied Mathematics (Class XII):
Depreciation
