Question

An asset is subject to $10\%$ depreciation on reducing balance method. If the annual depreciation for the year $2013-14$ amounts to Rs. $4500$. The book value of the asset as on $\mathrm{31.03.14}$ will be ___________.

• A. Rs. $45,000$
• B. Rs. $40,500$
• C. Rs. $50,000$
• D. Rs. $48,000$

Answer 1

Answer: (B)

Rs. $40,500$

WDV is a method of depreciation in which a fixed rate of depreciation is charged on the book value of the asset, over its useful life. The amount of depreciation goes on decreasing every year.

Annual depreciation for the year 2013-14 amounts to Rs. 4,500

Rate of depreciation = 10%

So, if Rs. 4,500 is 10% then how much will be the amount of book value on 31.03.13 i.e. 100%

Book value = (Rs. 4,500 x 100)/10 = Rs. 45,000

Book value on 31.03.14 = Book value on 31.03.13 - Depreciation of year 2013-14

Book value on 31.03.14 = Rs.45,000 - Rs.4,500

Book value on 31.03.14 = Rs.40,500