Q.6. Calculate annual depreciation from the following informations.
Purchases price of machinery Rs. 85,000.
Transportation charges Rs. 3,000.
Trial run expenses Rs. 12,000.
Scrap value after the end of useful life of 6 years is Rs. 16,000.
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Under straight line method of depreciation, depreciation expense is calculated as below:
Depreciation = (Cost of Asset - Scrap value)/ Estimated useful life
Depreciation = (Rs. 252000 - Rs. 12000) / 6 years
Depreciation = Rs. 240000 / 6 years
Depreciation = Rs. 40000.
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