An asset was purchased for Rs. 12,500 and under the reducing balance method 20 percent of the reducing value of the asset is written off each year. What is the value of the asset at the end of three years?
An asset was purchased for Rs. 12,500 and under the reducing balance method 20 percent of the reducing value of the asset is written off each year. What is the value of the asset at the end of three years?
The correct option is D Rs.6,400
Calculation of the value of asset at the end of three years under written down value method:
Cost of the asset Rs. 12500
Less : Depreciation @ 20% Rs. (2500)
Written down value at the end of
first year Rs.
10000
Less : Depreciation @ 20% Rs (2000)
Written down
value at the end of second year Rs.
8000
Less
: Depreciation @ 20% Rs.
(1600)
Written down
value at the end of third year Rs. 6400
Calculation of the value of asset at the end of three years under written down value method:
Cost of the asset Rs. 12500
Less : Depreciation @ 20% Rs. (2500)
Written down value at the end of first year Rs. 10000
Less : Depreciation @ 20% Rs (2000)
Written down value at the end of second year Rs. 8000
Less : Depreciation @ 20% Rs. (1600)
Written down
value at the end of third year Rs. 6400
