An electric bike costs Rs. 42,000 and has a useful life of 10 years. If annual depreciation is Rs. 3,000, then the scrap value by using linear method of depreciation is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 12000
In the linear (straight line) method, the same depreciation is charged every year:
\( \displaystyle \text{Annual depreciation}=\frac{\text{Cost}-\text{Scrap value}}{\text{Useful life}} \)
\( \displaystyle 3000=\frac{42000-S}{10} \)
\( \displaystyle 42000-S=30000 \)
\( \displaystyle S=12000 \)
So the scrap value is Rs. 12,000.