Question

An asset is purchased for Rs. 50,000 on which depreciation is to be provided annually according to the straight line method. The useful life to the asset is 10 years and the residual value is Rs. 10,000. The rate of depreciation is?

• A. 20%
• B. 18%
• C. 10%
• D. 8%

Answer 1

Answer: (D)

8%

Depreciation = (Cost price - scrap value)/ Useful life of an asset

Rate of depreciation = Depreciation value/ Cost price of asset

Where,

Cost price = Rs. 50,000, Scrap value = Rs. 10,000, Useful life of asset = 10 years

Depreciation = Rs. (50000 - 10000)/ 10 years

Depreciation = Rs 4000

Rate of depreciation = Rs. (4000 / 50000) * 100

Rate of depreciation = 8%