Question

Cost of machinery = Rs.2,52,000
Salvage value = Rs.12,000
Useful life = 6 years
Annual depreciation under straight line method will be:

• A. Rs. 42,000
• B. Rs. 40,000
• C. Rs. 15,000
• D. Rs. 28,000

Answer 1

The correct option is B Rs. 40,000

Purchase Price of Machine Rs. 2,52,000 - Salvage value Rs. 12000 = Depreciable asset cost of Rs 2,40,000

6 year useful life = 1/6 depreciation rate per year

1/6 x 2,40,000 depreciable asset cost = Rs 40,000 annual depreciation