Calculation of Rate of Depreciation in Straight Line Method
5. A company purchased a plant for * 4,00,000. The useful life of the plant is 10 years and the
estimated scrap value is * 40,000. Determine the rate of depreciation when the management
wants to depreciate it by straight line method.
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3
Answer:
9% p.a.
Explanation:
Sraight Line Method
Annual Dep. = Original cost - scrap value / estimated life in year
Annual Dep. = 4,00,000 - 40,000 / 10 => 3,60,000/10 => 36,000
Rate of Dep. = Annual Dep. × 100/original cost
Rate of Dep. = 36,000×100/4,00,000 => 9%p.a
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