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Question

An asset is purchased for Rs. 50,000 on 1st January. The life of the machine is estimated to be 5 years. It is decided to provide depreciation under annuity method by charging 5% interest. The annual depreciation will be ____________.

A
Rs.13,800
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B
Rs.14,250
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C
Rs.11,548
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D
Rs.13,500
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Solution

The correct option is D Rs.11,548
Annuity factor = 0.230975 (Taken from table)
The annual charge for depreciation reckoning interest at 5% p.a. would be 0.230975
the annual depreciation =Rs. 50,000 x 0.23975 =Rs. 11,548.75 i.e. Rs. 11,548

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