A vehicle whose cost is Rs. 6,00,000 will depreciate to a scrap value of Rs. 60,000 in 6 years. Then the book value of the vehicle at the end of the 3rd year is:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 3,30,000
The question does not name a method of depreciation. The CUET Applied Mathematics syllabus (Financial Mathematics) prescribes the linear method of depreciation, also called the straight line method, so it is used here. In this method the asset loses the same amount every year, so its value falls in equal steps from the cost to the scrap value.
\( \displaystyle \text{Depreciation per year}=\frac{6{,}00{,}000-60{,}000}{6} \)
\( \displaystyle =90{,}000 \)
After 3 years the book value is
\( 6{,}00{,}000-3\times 90{,}000=3{,}30{,}000 \)
So the book value at the end of the 3rd year is Rs. 3,30,000.
CBSE Applied Mathematics (Class XII):
Depreciation
