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Total cost of machinery = Rs 1,50,000 + Rs 50,000 = 2,00,000
Calculation of depreciation
Depreciation for 1st year
2,00,000@20% = 40,000
Depreciation for 2nd Year
160000(2,00,000-40,000)@20% = 32,000
Depreciation for 3rd year
1,28,000(1,60,000-32,000)@20% = 25000
Depreciation for 4th year
1,02,000(1,28,000-25000)@20% = 20,480
Which implies that the residual value of the asset at the end of 4th year is Rs 81920 (1,02,000-20,480)
Hence the estimated useful life of the asset is 4 years.
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