Original Cost of an asset is Rs.3,50,000; its salvage value is Rs 25,000; useful life 5 years. Annual Depreciation under Straight Line Method ?
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Given:
Original cost of the asset: ₹3,50,000
salvage value: ₹25,000
useful life: 5 years
To find:
Annual depreciation under straight line method.
Solution:
Straight line method states that the value of the asset depreciates uniformly over the span of useful years of the asset.
Salvage value is the gross value of the asset upon exhaustion of the useful period.
Cost value of the asset is the initial/purchase value of the asset.
Useful life of the asset is the approximated time for which the asset is useful.
Formulae:
Total depreciable amount=Original cost-salvage value
annual depreciation=Total depreciation/useful life
Calculation:
Total depreciable amount= ₹3,50,000-25,000
annual depreciation= ₹3,25,000/5
annual depreciation= ₹65,000
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