A washing machine costing Rs. 40000 has an estimated useful life of 4 years and a scrap value of Rs. 5000. The depreciation rate percentage is:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → 25%
Under the linear (straight line) method, the depreciable amount, cost − scrap value, is written off in equal parts over the useful life:
\( \displaystyle \text{Annual depreciation}=\frac{C-S}{n} \)
\( \displaystyle =\frac{40000-5000}{4}=\text{Rs.}\ 8750 \)
The rate of depreciation is the annual depreciation as a percentage of the depreciable amount:
\( \displaystyle r=\frac{8750}{35000}\times 100 \)
\( \displaystyle =\frac{1}{4}\times 100=25\% \)