Consider the following information:
I. Rate of depreciation under the written down method= 20%
II. Original cost of the asset = Rs. 2,00,000
III. Residual value of the asset at the end of useful life= Rs. 81,920
The estimated useful life of the asset, in years, is

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Solution

The correct option is A 4
Calculation of Estimated Useful life of the asset:
we will subtract depreciation till the value of asset came to Rs 81, 920

Depreciationfor 1st year
2,00,000@20% = 40,000
Depreciationfor 2nd year
1,60,000(2,00,000-40,000)@20% = 32,000
Depreciationfor 3rd year
1,28,000(1,60,000-32,000)@20% = 25,600
Depreciationfor 4th year
1,02,400@20% = 20,480
Now the residual value of asset is 1,02,400-20,480 = 81,920

Hence the estimated useful life of the asset is 4 years.

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Consider the following information:I. Rate of depreciation under the written down method= 20%II. Original cost of the asset = Rs. 2,00,000III. Residual value of the asset at the end of useful life= Rs. 81,920The estimated useful life of the asset, in years, is

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I. Rate of depreciation under the written down method= 20%
II. Original cost of the asset = Rs. 2,00,000
III. Residual value of the asset at the end of useful life= Rs. 81,920
The estimated useful life of the asset, in years, is