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Question
An asset is purchased for Rs. 60,000 and Rs. 2,000 is spent on its installation. The useful life of plant is 10 years and the essential scarp value is Rs. 6,000. Annual Depreciation under the original cost method would be _______________.
An asset is purchased for Rs. 60,000 and Rs. 2,000 is spent on its installation. The useful life of plant is 10 years and the essential scarp value is Rs. 6,000. Annual Depreciation under the original cost method would be _______________.
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Solution
The correct option is C Rs. 5,600
Option C is correct. In straight line method,
depreciation charged remains same for every year.
Purchase Price of
machine = 60,000
Installation expenses
= 2,000
Total cost of machine
= 60,000+2,000
=62,000
Depreciation
= Cost Of Machine - salvage
value / estimated life
of
machine
= 62,000 - 6000/ 5
Annual Depreciation
= 5600
All the expenses
before an asset becomes ready to use is added into asset.
Option C is correct. In straight line method, depreciation charged remains same for every year.
Purchase Price of machine = 60,000
Installation expenses = 2,000
Total cost of machine = 60,000+2,000
=62,000
Depreciation = Cost Of Machine - salvage value / estimated life of machine
= 62,000 - 6000/ 5
Annual Depreciation = 5600
All the expenses before an asset becomes ready to use is added into asset.
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