Question

An asset was shown in the Balance sheet during the last three years at $Rs.50000$, $Rs.45000$ and $Rs.40000$, the depreciation for $4th$ year will be ___________.

• A. $Rs.4,000$
  
• B. $Rs.5,000$
• C. $Rs.4,500$
• D. $Rs.3,980$

Answer 1

Answer: (B)

$Rs.5,000$

The book value of last three years are Rs. 50,000, Rs. 45,000, and Rs. 40,000

The depreciation for the three year is constant which is Rs. 5,000 (i.e. Rs. 50,000 - Rs. 45,000)

As the amount of depreciation is constant for all the three years, the firm is using straight line method of depreciation.

Hence the amount of depreciation for the 4th year will be Rs. 5,000.