Question

3 points
b.The cost price of a machine
is Rs 1,00,000. If the rate of
depreciation is 10% per year,
find the depreciation in price
of the machine after two
years.​

Answer 1

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There are two common methods of computing depreciation

Straight Line method (SLM)

Written down value method (WDV)

By using written down value method which means calculating depreciation on written down value and not on original cost every year, the depreciation can be computed as follows:

1st Year

₹10,000 - 10% of 10,000 = ₹9000

2nd Year

₹9000 - 10% of 9000 = ₹ 8100

3rd Year

₹8100 - 10% of 8100 = ₹7290

4th Year

₹7290 - 10% of 7290 = ₹6561

After 4 years, the machine will be valued at ₹6561

Answer 2

Solution!!

Cost price of machine = Rs 1,00,000

Depreciation per year = 10%

In the first year,

Depreciation = 10% of 1,00,000

Depreciation = (10/100) × 1,00,000

Depreciation = 10 × 1,000

Depreciation = Rs 10,000

Cost price of machine after depreciation = Rs 1,00,000 - Rs 10,000

= Rs 90,000

In the second year,

Cost price of machine = Rs 90,000

Depreciation = 10% of 90,000

Depreciation = (10/100) × 90,000

Depreciation = 10 × 900

Depreciation = Rs 9,000

Cost price of machine after depreciation = Rs 90,000 - Rs 9,000

= Rs 81,000

Depreciation in price after 2 years = Rs 1,00,000 - Rs 81,000 = Rs 19,000