Question

A machine is purchased for Rs. $200$. To achieve a residual value of Rs. $128$ at the end of the second year (assuming that depreciation is calculated at the end of each year), the percentage depreciation using the reducing balance method must be ___________.

• A. $72$%
• B. $36$%
• C. $20$%
• D. $12$%

Answer 1

Answer: (C)

$20$%

According to question, it can be concluded that the required method of charging depreciation asked in the question is written down value method.

Formula of depreciation under WDV method is :

D = 1 – ⁿ√R/C

Where R = Rsidual value = Rs. 128

n = no. of years = 2 years

C = Cost of the asset = Rs. 200

D = 1 – ²√128/200

D = 1 - 2√0.64

D = 1 - 0.8 = 0.2

D = 0.2 or 20%