Question

Calculate the Rate of Depreciation under Straight Line Method (SLM) from the following:
Purchased a second-hand machine for ₹ 96,000, spent ₹ 24,000 on its cartage, repairs and installation, estimated useful life of machine 4 years. Estimated residual value ₹ 72,000.

Answer 1

$\begin{array}{l}\text{Amount of Depreciation}=\frac{\text{Cost of Machine}-\text{Scrap Value of Machine}}{\text{Life in Years}}\\ \text{=}\frac{1,20,000-72,000}{4}=\text{Rs 12,000}\\ \text{Rate of Depreciation}=\frac{\text{Amount of Depreciation}}{\text{Cost of Machine}}\times 100\\ \text{=}\frac{12,000}{1,20,000}\times 100=10\%\text{p.a.}\\ \end{array}$