Question

b) A machine is purchased for Rs.60,000/- and spent

Rs.4,000/- for freight and Rs.1,000/- for its installation.

Machine's working life is 10 years and estimated scrap

value will be Rs.5,000/-. Calculate the amount of

depreciation. ​

Answer 1

Explanation:

According to straight line method, the amount of yearl -depreciation is calculated as follows:

Depreciation = (Cost of asset - Scrap value) / Estimated life and,

Depreciation = Rs. ( 50000 - 10000 ) / 10

Depreciation = Rs. 4000

Depreciation rate = (Depreciation expense / Cost of asset) * 100

Depreciation rate = (Rs. 4000 / Rs. 50000 ) * 100

Depreciation rate = 8%