Question

An asset was shown in the Balance sheet during the last three years at Rs. $50000$, Rs. $45000$ and Rs. $40500$. Discuss the rate of depreciation charge.

• A. $15\%$ on WDV
• B. $15\%$ on SLM
• C. $10\%$ on WDV
• D. $90\%$ on WDV

Answer 1

The correct option is C $10\%$ on WDV

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. In the given question the amount of depreciation decreased in every year hence, company is following WDV method of depreciation. The rate of depreciation charge is 10%.

1st year's book value = Rs. 50,000

2nd year's book value = Rs.45,000

Difference between two year book value =Rs. 5,000

Hence, Rate of depreciation = Rs.5,000/Rs.50,000 = 10%