Question

Dinesh Garments purchased a machine for Rs. 50,000 and spent Rs. 6,000 on its erection. On the date of purchase, it was estimated that the effective life of the machine will be ten years and after ten years its scrap value will be Rs. 6000. The amount of depreciation for second year on straight-line basis is:

• A. Rs. 5,000
• B. Rs. 6,000
• C. Rs. 5,600
• D. Rs. 6,200

Answer 1

Answer: (A)

Rs. 5,000

Depreciation as per straight line $=$ {Cost - Residual value}/{Useful life}
$=56000-6000/10=5000$