A car costing Rs. 5,00,000 has a useful life of 15 years. The estimated scrap value is Rs. 50,000. The annual depreciation using the straight line method is
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 30,000
In the straight line method the same amount is written off every year, and only the cost less the scrap value is written off.
\( \displaystyle \text{Annual depreciation}=\frac{\text{cost}-\text{scrap value}}{\text{useful life}} \)
\( \displaystyle =\frac{5{,}00{,}000-50{,}000}{15} \)
\( \displaystyle =\text{Rs. }30{,}000 \)
Why the other options are incorrect
Option (1) Rs. 45,000 — Incorrect. The annual depreciation is Rs. 30,000, not Rs. 45,000.
Option (2) Rs. 33,333.33 — Incorrect. This is Rs. 5,00,000 divided by 15, which ignores the scrap value of Rs. 50,000.
Option (4) Rs. 35,000 — Incorrect. The annual depreciation is Rs. 30,000, not Rs. 35,000.
CBSE Applied Mathematics (Class XII):
Depreciation
