Question

Machinery was purchased for rs20000. its residual value was estimated to be rs5000 while its monthly depreciation expenses are rs500 using straight line method. which of the following is the annual rate of depreciation? 50% calculate

Answer 1

Answer: The Annual Rate of Depreciation is by 40%

Price of machinery at which it was originally purchased at  = Rs. 20,000

Salvage Value or the residual value given = Rs. 5,000

Therefore, its depreciated value after deducting residual value  = Rs. 15,000

Monthly Depreciation expenses are = Rs. 500

So, the total Annual Depreciation (12 months) = Rs. 500 * 12 months = Rs. 6,000

Therefore, Life Time of machine would be

= Residual value of the machine/ Annual depreciation

= Rs. 15000/6000

= 2.5 yrs

So, Annual Rate of Depreciation = $\frac{1}{2.5} *100$

= 40%