Question

The useful life of a machine is estimated to be 10 years and cost 10,000. Rate of depreciation
is 10% p.a. The scrap value at the end of its life is...?
The correct answer is ₹3,486.78
The question is from time value of money
Please give detailed explanation to your answer

Answer 1

Answer:

$\huge{\fbox{\fbox{\bigstar{\mathfrak{\red{Answer}}}}}}$

Using declining balance depreciation

Declining Balance Depreciation Rate = 1 – (Salvage Value / Cost)^(1/Years)

Rearrange

Salvage value = Cost x (1 - Depreciation rate)^Years

Salvage value = 10000 x (1 - 10%)^10 = 3,486.78

Answer 2

Step-by-step explanation:

Using declining balance depreciation

Declining Balance Depreciation Rate = 1 – (Salvage Value / Cost)^(1/Years)

Rearrange

Salvage value = Cost x (1 - Depreciation rate)^Years

Salvage value = 10000 x (1 - 10%)^10 = 3,486.78